Inflation data, which came at its highest level in the United States in forty years, caused panic and high volatility during the American session yesterday, Thursday, February 10th, as it caused a rise in the yield on US Treasury bonds and thus pressured the currency, stock, commodity and metal markets.

We note that the CPI, which measures inflation, rose by 0.6% in January after rising by about 0.4% in December, and the annual index over the past 12 months rose to 7.5% from 7% in December, the highest pace since 1981, better than expectations. It indicated an increase to 7.3%, while the annual core index rose to 6% from 5.5% (expectations 5.6%).

The yield on US 10-year Treasury bonds reached its highest level since August of 2019 after rising more than 5% yesterday, Thursday, to trade at 2% levels, while the yield on the two-year bonds, which is concerned with interest rate expectations, traded at its highest level since January 2020 at 1.58.

US futures expectations, according to the CME FedWatch tool, increased by 50 basis points in the March meeting to more than 80% this morning, Friday, after it was below 20% before the inflation figures, which explains the strong movements of the US dollar and stocks during the session.

The statements of the President of the US Federal Reserve in St. Louis James Bullard that he supports raising the US Federal Reserve by half a point in the March meeting and to reach 1% by July supported the expectations of the markets and futures contracts as well.

The US dollar, in its first reaction, rose more than 0.50% after the inflation figures, to test 96 levels, before retreating strongly in a wave of profit taking that did not last long before returning and regaining the 96 levels in the Asian session, and is now trading at 95.95 levels.

The yellow metal also traded in a fluctuating range between the initial reaction and the profit taking wave, before settling on a decline, and is now trading at levels of 1822 dollars per ounce, after testing its highest level in two weeks at 1840 dollars.