The US dollar is higher across the board in the countdown to CPI.
Yesterday, the strong dollar foreshadowed a rout in risk assets but I’m not (yet) sure that’s what we’re also seeing today. It does warrant some caution.
The Eurozone data calendar was basically vacant so far today except for a mixed Italian industrial production report so the moves are primarily a follow-through from yesterday.
In any case, CPI could quickly upend the narrative. This one is a particularly important report with the market no longer feeling confident that 5% will be the Fed’s top. The consensus is +8.0% y/y on the headline and +6.5% y/y on the core.
Risks are two sided with any kind of miss likely to spark a big reaction in risk assets. Dollar longs are a crowded trade so you wouldn’t expect to see strength into the report but that’s what is happening and, I think reflects lingering fallout from yesterday’s risk rout and the ongoing disaster in crypto.
h/t @BeaglierCap for the meme.