On more prosaic matters, Friday’s focus will be on benchmark U.S. consumer price index revisions for last year – a sometimes nebulous data release that’s taken on more importance during the cost-of-living crisis over the past year and which last year pushed the Federal Reserve into an even tighter policy stance.
The revisions come ahead of the critical January CPI update next week and which is expected to show some easing back of inflation after a surprise jump the prior month.
But with Fed officials signalling loudly that they are in no rush to commence cutting interest rates just yet – and despite well received 10- and 30-year Treasury auctions this week – bond yields crept higher again before Friday’s open.
Ten-year Treasury yields nudged up to two-week highs above 4.17%.
And an emboldened dollar pushed higher on the back of that powerful constellation of growth-fueled bond yield gains and record high U.S. stocks. Dollar/yen clocked another two-month high following this week’s relaxed Bank of Japan take on future policy tightening there.
However, the International Monetary Fund on Friday urged the BoJ to consider ending its yield curve control and massive bond purchases now, and then gradually raise short-term rates.
European central bankers were perhaps less relaxed – very much chiming with the Fed take on remaining patient before cutting rates and most wanting to be assured disinflation is entrenched before voting for rate cuts.
Bank of England hawk Jonathan Haskel, who voted to raise interest rates last week, said he is encouraged by signs that Britain’s inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance.
Britain’s 10-year gilt yield hit its highest level in almost two months early on Friday.
ECB policymakers also urged caution and stressed the need for more data to build confidence inflation will return to 2%.
