Treasury markets opened in Asia with a renewed upswing, pushing the yield on the 10-year note up by three basis points to 4.34%, marking a fresh move in US government bonds following the Monday holiday. This uptick in yields coincided with further gains for the Dollar Spot Index, which climbed an additional 0.2% after reaching a one-year high earlier in the week, signaling persistent demand for the greenback.
Meanwhile, oil markets remain relatively subdued after experiencing their steepest decline in two weeks. Investors are now bracing for US inflation data due Wednesday, which is set to provide a crucial gauge on price pressures within the economy. The core Consumer Price Index (CPI), a key metric that strips out the volatile food and energy sectors, is expected to show steady growth on both monthly and annual bases, potentially matching September’s inflation trajectory. These figures could offer new insights into the Federal Reserve’s monetary policy path and the broader inflationary landscape.
In equity markets, the dollar’s strength has continued to bolster US stocks, buoyed by lingering effects of policies introduced during former President Trump’s administration. However, while Trump’s trade measures have supported domestic assets, global markets remain cautious. The proposed tariff expansions, aimed primarily at Chinese imports, could impose significant headwinds for major exporting economies like China, potentially dampening international demand and straining global trade dynamics. As these policies elevate the US trade deficit and bolster the dollar, they may, in turn, exert upward pressure on the Federal Reserve to decelerate any planned easing measures, which would have implications across the broader financial landscape.
As this mix of inflation data and trade policies unfolds, market participants can expect increased volatility and a recalibration of growth expectations across sectors and geographies. All eyes remain on Wednesday’s CPI report as a potential market mover in the ongoing inflation narrative.