EUR

Data released yesterday showed core inflation hitting a four-decade high, bolstering the case for more aggressive action from the Federal Reserve. Odds on back-to-back three-quarter-point hikes at the November and December meetings jumped, and terminal rate expectations climbed close to 5.25 percent – well above the 4.6 percent forecast provided by central bankers in September. The initial reaction in equity and foreign exchange markets aligned with tighter policy expectations. Major indices tumbled and the dollar rose. But a profound reversal began by mid-morning, with stock markets and risk-sensitive currencies whipping upward, sending the S&P 500 to a 2.6-percent daily gain....

With the week’s biggest data release set to drop in less than half an hour, financial markets are still hitting the snooze button. Treasuries are flat, futures are stable, and the dollar is slightly weaker as traders limit risk. Investors expect the Bureau of Labor Statistics to report an acceleration in core inflation, adding to an already-compelling case for more tightening when the Federal Reserve meets in the first week of November. Minutes taken during the Federal Reserve’s last meeting, released yesterday, delivered no new insight for market participants. Policymakers remained committed to their “higher for longer” mantra, noting that...

Nerves are frayed after the Bank of England’s efforts to simultaneously ease and tighten policy continue to sow confusion in bond and currency markets. After stepping up its intervention efforts on Monday, the central bank offered to buy £5 billion in inflation-linked bonds yesterday morning, but instability returned when Governor Andrew Bailey warned pension funds support would end on Friday, saying “You’ve got three days left. You’ve got to get this done”. A later Financial Times article, referencing interviews conducted prior to Bailey’s comments, added to the mixed messaging by suggesting that officials were considering extending relief beyond Friday –...

Currency traders are treading cautiously ahead of a non-farm payrolls report that is expected to show the US job creation engine beginning to cool, but still running far too hot for the Federal Reserve. With high inflation and ever-rising interest rates weighing on economic activity, markets think roughly 250,000 new positions were created last month, down sharply from the 440,000 average in the first half, even as the unemployment rate holds near a historically-low 3.7 percent. Data released yesterday morning showed initial jobless claims jumping to a seasonally-adjusted 219,000 last week from a revised 190,000 in the prior week –...