The dollar index rose 0.7% on Thursday after record high core euro zone inflation data proved overly anticipated and U.S.
labor data ratcheted up the pressure on the Fed for further rate hikes, sending 2-year UST-bund yields spreads lower and EUR/USD down 0.85%.

The limited rise in bund yields was partly due to above-forecast inflation readings from Spain, France and German earlier in the week having already raised expectations for the euro zone results.

Bolstering Treasury yields and the dollar were the sharp upward revision to Q4 labor costs and sub-forecast weekly initial and continuing jobless claims, the latter hinting that next Friday's non-farm payrolls report could be robust.

The need for considerably higher ECB and Fed rates cast a somewhat risk-off pall that tended to favor the haven dollar.
Its allure is enhanced by peak Fed hike pricing now nearly at 5.5% by September versus the current ECB peak closer to 4% by year-end.

USD/JPY rose 0.54%, with virtually no expectation of a BoJ policy rate hike, and at most another modest tweak higher in its yield curve cap longer term.
New 2023 highs were made above the 100-DMA and key resistance in the 137.40s could be cleared if Tokyo CPI and U.S. ISM data Friday push 2-year UST-JGB yields to new 22-year highs.

Sterling fell 0.8% toward the 200-day moving average and potential neckline of a major double-top formation at 1.1920-26, while Bank of England Chief Economist Huw Pill seemed to struggle with disparate inflation indicationsnS8N32P0G2.

The Australian dollar and yuan fell 0.7% and 0.6%, respectively, amid geopolitical tensions and some retrenchment of strong China reopening trades, with copper down 2.25%, partly on doubts about the recovery in China's key property market.

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