The moves in financial markets today are incredible, especially when you consider that CPI was only 0.1 percentage points below expectations (and even less unrounded).
It speaks to the positioning of market participants and the mountains of cash on the sidelines. Bonds are hugely bid today with US 5-year yields down 23 basis points to 4.42%. The S&P 500 is up 2.1% and the Russell 2000 up nearly 5%.
The FX market hasn’t sat this one out at all, with the dollar sinking hard and finding new lows at the moment. Big gainers include the antipodeans, euro and pound.
Cable is up 219 pips to the best levels since mid-September.
Fed officials have been trying to keep the option to hike on the table but it looks like they won’t have that choice. The market is now pricing in no chance of a hike and nearly at full cut priced in at the May 1 meeting.