This CPI data is significant in that it shot up over 2% – the highest since 2018 when the prints of 2.95% (July) and 2.70% (Aug) sent the 10Y up to 3.25%. But, it’s the inflation happening right now, which will be reported next month, that the Fed is worried about.

As we’ve anticipated, March’s 2.6% YoY print was largely the result of a large (22%, should be 28%) increase in gas prices. Though clearly non-transitory food, utilities, used cars and medical services all played an important role. The data next month, however, will put this to shame. As things stand now, April 2021’s gasoline prices (2.77) are up a whopping 60% over 2020 prices.

As we’ve discussed many times, this should put CPI at over 3% – perhaps closer to 4%.

The Fed seems to be betting that it can divert attention from the coming data. And, maybe they can, as bond prices seem to be immune to this data and the recent blowout PPI.

But, it remains to be seen whether the usual algo tricks will be able to handle a CPI print of over 3%.

continued for members…

First, no reaction from CL and RB (who, me?) In fact, RB saw a bullish 10/20 cross this morning. It’s very modest and probably won’t last, but we’ll note it just the same.If we zoom out a little, we can see RB has been in a holding pattern for several weeks.

Between CL, RB and VIX…

…futures’ reaction to the JNJ vaccine woes has been “fixed.” Back to even on the day, still within striking distance of the 1.618 Fib  – but still eyeing a 3.618 backtest.

USDJPY continues its backtest of the broken purple channel – suggesting another leg up is still an option if/when needed. This, combined with EURUSD’s continuing bounce, has put DXY safely back inside the rising white channel.