The headline and core CPI beat yesterday caused an unusual market response as the dollar became softer and US equities printed higher despite the market inflation.
The initial move was the expected reaction where the dollar would rise and equities down upon discovering that inflation is hotter and stickier than expected. However, price action exhibited a massive turnaround. The session ended with the dollar softer, and US equities printed higher, moving just over 780 points between the daily low and daily high.
The reason behind the unexpected response is currently unknown, but it will be interesting to see if the “bad news is good news” narrative develops around future prints.
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