US CPI Report Fails to Dislodge Long-End Yields and Dollar Gains

The July US Consumer Price Index (CPI) report was released yesterday and it did not have the expected impact on long-end Treasury yields or the US dollar. The headline CPI rose by 0.1% month-on-month, while core CPI increased by 0.2%. The initial reaction to the report was for Treasury yields to fall across the curve and the US dollar to weaken.

However, later in the day, only the front end of the Treasury curve retained its decline, resulting in a bull steepening of the yield curve. This distinction is significant for the US dollar, as longer-dated yields gave back much of their initial decrease.

A modest rebound in the US dollar was seen after the report's release, but bulls are struggling to sustain the gains. Technical analysis suggests that further losses could be in store for the dollar in the coming months.