US dollar jumps as Fed officials highlight higher neutral rate, sticky CPI

Headlines:

• US inflation in focus for the day ahead
• What is the distribution of forecasts for the US CPI?
• US CPI data due Wednesday, the ranges of estimates (& why they're crucial to know)
• ECB's Villeroy says to expect more rate cuts
• ECB's Nagel: Core inflation rate is still quite high
• BOE's Mann: Inflation has definitely not been vanquished
• BOE's Mann: I describe myself as an 'activist' rather than a 'gradualist' on rates
• US MBA mortgage applications w.e. 8 November +0.5% vs -10.8% prior
• Japan government reportedly mulls continuing electricity, gas price subsidies next year
• German economy ministry says US election result presents renewed uncertainty

Markets:

• EUR leads, JPY lags on the day
• European equities mixed; S&P 500 futures down 0.2%
• US 10-year yields down 2.3 bps to 4.409%
• Gold up 0.5% to $2,611.43
• WTI crude up 0.3% to $68.31
• Bitcoin down 0.7% to $87,702

It was a quiet session as the post-election trades are pausing for a bit of a breather in anticipation of the US CPI report later.

That is the main event for today, thus keeping a more pensive mood among major currencies. The dollar is steadier across the board, holding on to gains with EUR/USD briefly dipping below 1.0600 before bouncing back up to 1.0630 now. Meanwhile, USD/JPY had a brief run above 155.00 before holding around 154.85 currently.

The other major currencies held in tighter ranges against the dollar with GBP/USD around 1.2740-50 levels and USD/CAD around 1.3940-50 levels mostly. Even AUD/USD is keeping within a 23 pips range, seen at 0.6524 currently and down just 0.1% on the day.

In other markets, equities are more cautious with European indices holding more mixed and a little lower after the heavy selling yesterday. US futures are also pointing down slightly alongside bond yields but a lot can change once we get past the CPI hurdle later.

Fedspeak will continue to be in focus as well besides the inflation numbers. And then tomorrow, we will be getting the PPI report and weekly jobless claims before the retail sales data on Friday. In between that, Fed chair Powell will also be speaking.

So, those will be key risk events to add to the post-election trading mix for the remainder of the week.

The picture in the major currencies space is not much changed at all from over five hours ago here. There have been some light extension of the ranges but overall, it's more or less where we left off at the end of Asia trading. The dollar continues to stay more poised on the week, keeping its post-election momentum.

As mentioned earlier, USD/JPY and EUR/USD are two of the more interesting pairs as they are nearing key technical junctures.

The former is taking a run at the 155.00 mark for the first time since the end of July. On a firm break above the key level, there is little to no technical resistance in that pocket until the 160.00 level.

As for EUR/USD, the pair is down to test the 1.0600 mark with the April low of 1.0601 in play. For now, large option expiries at 1.0600 is also adding another defensive layer. But all of this is tentative up until we get to the US CPI report later.

That will be the next key risk event to watch with a stronger report potentially stirring up further dollar gains and a trigger to breach the technical levels above.