The dollar index gained 0.54% on Tuesday after surging U.S. June inflation nAPN072H2D forced markets to price back in Fed rate hikes by the end of next year, while ECB President Christine Lagarde promised the ECB would not repeat past mistakes of tightening too soon nS8N2KW084.
The dollar's initial bullish response was moderated somewhat by the bear Treasury yield curve flattening response suggesting less fear of the Fed letting inflation get out of hand and doubts about how much tightening financial markets and the economy could withstand.
A knee-jerk drop in stocks after the CPI added to that angst, but the major U.S. indexes recovered to make record highs, before slumping again when long-term Treasury yields spiked higher, encouraged by a poorly received 30-year Treasury re-opening auction that sent bond yield up 5bp on the day after a poor 30-year auction.
The dollar then saw fresh gains after the Treasury yield curve steepened.
EUR/USD fell 0.59%, brushing July's 1.17815 trend lows on EBS, with no major support between there and this year's 1.1704 low.
Sterling fell 0.41%, having been as high at 1.3905 in late Asian trading, then tumbling to 1.37995 after the U.S. CPI, basically carving out a 1.38-139 range.
Prices have since homed in around the 10-day moving average by 1.3830.
Ten-year Gilt-Treasury yields spreads have fallen 10bps since Friday's rebound high.
USD/JPY gained 0.2% and was probed the tenkan, 21-day moving average and Thursday's high resistance at 110.60-65.
A close above the 10-day moving average at 110.68 could put the 111.66 July trend high in play, particularly if the remainder of this week's U.S. economic data keep the pressure on the Fed to start the normalization process sooner.
Before then Fed Chair Jerome Powell will be grilled by Congressional panels Wednesday and Thursday, a task made even less enviable after Tuesday's inflation data.
Meanwhile, the White House said it would be worth investigating whether price hikes in certain services reflect price gouging nL1N2OP1LG.
AUD/USD's 0.35% loss was actually a good result for a high-beta currency, such as USD/CAD's 0.44% rise.
The aussie was helped by strong Chinese trade data nL1N2OP04F that suggested the PBOC's RRR cut nL2N2OL0KC was not a sign of serious stress.
USD/CNH gained just 0.05%.
Oil rallied on doubts OPEC+ will agree to raise output enough to reverse the tightening of supplies amid pandemic recoveries.
Bitcoin and ether saw further small sell-offs -- by cryptocurrency standards -- as digital rivals plot their strategies nL3N2OJ3PB.
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