Trading Day-AI cheer, new highs near

The latest U.S. inflation figures were bang in line with expectations. Coming on the heels of a soft employment report, the outlook for September's Fed meeting is tilting more towards rates being kept on hold. Before the CPI data, traders were split 50-50 on rates being kept unchanged or raised by 25 bps. Now, that's 60-40 in favor of no change. Relief for Fed Chair Kevin Warsh, perhaps, although the center of gravity on the FOMC is shifting towards hiking.

One clear market consequence of these two key data releases and Warsh's poorly received press conference last month has been steeper yield curves. The 2s/10s curve has steepened by around 20 basis points, mostly a "bull steepening" led by the short end. The 2s/30s curve is almost 30 bps steeper, driven by both short-end buying and long-end selling. Both curves on Wednesday hit their steepest since May. Policymakers won't be too worried, providing the long end remains well-contained.