The day was characterized by markets recalibrating from peak fiscal fear in the UK and peak hawkish policy worry in the US, leading to a more neutral stance.
US inflation remained stable with the headline rate at 2.9% YoY for December, indicating that while core prices continue to rise, underlying pressures might be subsiding.
Despite the core CPI running 1.2 percentage points above the Fed's target, the figures are unlikely to alter the FOMC's policy outlook, maintaining a base case for a January rate hold.
As market participants react quickly to any changes, there's a consistent trend of over-extrapolation creating volatility, particularly in response to unexpected CPI data.
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