Wednesday delivered what it promised. September CPI came in hotter than expected on both headline and core measures, with headline at 3.7% year on year and core accelerating to 2.6% against a 2.5% consensus. The core reading of 0.3% month on month for a second consecutive month was the number that broke the session open: it gutted the Williams ceiling narrative that had supported gold, EUR/USD, and the dollar-soft thesis through Tuesday. The bond market repriced immediately, with the 10-year yield climbing above 5.27%, October Fed hike odds doubling toward 39%, and the dollar rallying to 15-month highs.
The level that mattered most was USD/JPY's 200-day moving average at 158.56, which the pair had been unable to close above for multiple consecutive sessions. Hot CPI supplied the catalyst, and the pair broke and closed through it cleanly, putting 160.00 back in the crosshairs and Bank of Japan intervention risk back on the table. EUR/USD failed its 1.1200 test and slid back below 1.1133. Gold collapsed from $4,161 toward $4,104 in the New York afternoon. Silver extended its chip-sector losses to the mid-$55s, a severe move. A Houthi strike on Saudi Aramco's Dhahran headquarters, confirmed with extensive building damage early in the London session, kept WTI supported above $95 despite the dollar headwind.
Into Thursday, Fed Chair Warsh speaks in Bangkok in a fireside chat with the IMF's Georgieva. His response to today's CPI print is the next binary. PPI data and Retail Sales also land. Subscribers with access to tonight's full briefing have the complete scenario matrix for each instrument, including where the Warsh event breaks the trades currently in play.