Fed Minutes Probably Sound More Hawkish Compared to Debate on Yields

The Fed minutes probably sound more hawkish compared to the current debate on the impact of higher long‐term yields. The US 10‐y yield at the time of the meeting was about 50 bps below last week’s top.

Crypto Nosedive Amid Stock Upturns

The crypto market did not support the impressive rise in risk appetite on traditional finances. Their combined capitalisation fell 1.7% over the past 24 hours to $1.055 trillion – the lowest in almost two weeks.

GBP/USD Drifting ahead of UK GDP

The UK economy has been struggling and GDP declined by 0.5% m/m in July. The markets are expecting a rebound on Wednesday, with GDP projected to rise by 0.2% m/m in August. For the three months to August, GDP is expected to increase by 0.3%, up from 0.2% in the previous release.

Australian Dollar's Rally Fizzles

Australia will release MI inflation expectations on Thursday. Inflation expectations are closely watched as they can manifest into actual inflation. The trend has been downward, with inflation expectations falling slowly over the past two months. Inflation expectations eased to 4.6% in September, its lowest level since April. Another drop is expected for October, with a consensus estimate of 4.4%.

Focus Turns to US CPI

US CPI will be the main focus today. We forecast both headline and core CPI below consensus expectations at +0.2% in m/m SA terms (consensus 0.3%). The energy price contribution remains positive and used car prices have edged slightly higher lately, but the shelter component continues to put downward pressure on inflation figures. Gradually cooling wage growth points towards further easing in core services CPI excl. shelter as well, which remains the key point of focus for the Fed.

US Inflation Data Could Disrupt Dovish Fed Trades

Due today, the US CPI data could, or could not show a further fall in headline and core inflation. A higher-than-expected set of inflation data could scale back a part of the recent dovishness regarding the Fed and reverse a part of the recent gains in US Treasuries.

Focus Turns to US September CPI

Later today, the focus turns to the US September CPI. Markets expects inflation to have eased further to 0.3% M/M and 3.6% Y/Y for the headline and 0.3% M/M and 4.1% for core. Given current market bias, a substantial upside surprise is probably needed to reverse the developing correction of lower LT yields and a softer dollar.

British Pound Shrugs as UK Economy Rebounds

The UK economy grew by 0.2% in August, rebounding from a revised 0.6% decline in July. The gain of 0.2% matched market expectations and the British pound is showing little reaction.

Australian Dollar Drifting Ahead of US Inflation Report

The Australian dollar is showing limited movement on Thursday. AUD/USD is trading at 0.6410 in the European session, down 0.05%.

US: Core Inflation Continues to Drift Lower, giving policymakers enough breathing room to remain on pause at November meeting

The September CPI reading delivered few surprises, with the core measure coming in bang-on expectations, and headline just a tick higher. While the monthly price gains for core inflation have firmed in August/September (+0.3% m/m) relative to the July/August (+0.2% m/m) readings, the underlying trend on core remains favorable. The twelve-month change now sits at a two-year low while the more recent three-month annualized trend is running at an even softer 3.1%.