Noticias FX

Core CPI Printed 0.3%, Exactly Like August and September. That Is What Fired the Half-Point Condition.

US October core CPI printed 0.3% month on month against a 0.2% consensus, and headline 0.4% against 0.3% — both one tenth hot.

The bigger finding is that we had the policy condition wrong. We published Governor Waller's trigger as "0.3% or more from September", sourced to a wire. The Federal Reserve Board's own speech text says the condition is the data coming in "similar to the past two monthly readings" with core "around 0.3 percent or even higher". Core was 0.3% in August and 0.3% in September. So the half-point branch never needed an upside surprise; it needed a continuation, and it got the most literal one available. We also correct a number: we published that CME FedWatch gave the 50bp branch "nothing at all". It was 1.4% at 13:00 UTC, thirty minutes before the release, and about 11% afterwards — a factor of roughly eight, from a base that was never zero. Worse, one publisher naming the same feed carries 100% for a December hike at 13:00 UTC and 85% at 16:30, after a print that made a hike more likely; four readings of one named feed span 15.6 points, so these figures are not a time series. The missing year-on-year field held exactly as we said on Monday — no 12-month change for all items, core, food, energy or shelter — yet the same Table A column prints 37.4% for gasoline and minus 3.3% for used cars, which we flag rather than explain. Composition: the headline's deceleration is entirely energy, 5.2% to 0.7%, while food went from flat to 0.5% and medical care tripled.

The December Repricing Happened Yesterday. One of the Three Baselines Says Nothing Moved.

Everyone has the same number this morning: the December Fed hike probability is around 70%.

Three readers carry it; none agrees on what it fell from — more than 80% on Wednesday, about 83% on Wednesday, or more than 70.9% on Thursday. On the third baseline the repricing is nine-tenths of a point. Lined up by timestamp the four readings are not a conflict but a mislabelled time series: 80% survived into Thursday's US morning, 70.9% by Thursday's close, about 70% now. The move was Thursday afternoon's, and the same named feed — CME FedWatch — is quoted at 80 and at 70 by one wire service two hours apart. The better finding is the curve: the two-year fell 10 to 11bp to 4.46-4.47% while the ten-year fell only 5 to 4.83-4.84%, a six basis point bull steepening confirmed by a published 10y-2y spread at +0.38pp. A flight to quality flattens; this took money out of the next two meetings and left the term premium alone. The driver is in the swaps — the one-year US inflation swap fell 24.9bp to 2.16% and the euro one-year 25.9bp to 3.10% on a 9% crude collapse. VIX rose almost 70% to 28.17 while MOVE stayed below 100. And we finally opened Treasury's refunding statement: the guidance sentence is confirmed verbatim, $125bn settles 16 November raising about $28bn of new cash, the 7-year conversion does not start until March 2027, and our own caption dating the February refunding to the 1st was wrong — the issuer says Wednesday 3 February.

25.8 Basis Points Was Never a December Number. It Is 1.05 Hikes.

For five slots this desk carried two Fed figures that would not reconcile: October at 4.3 basis points and 15 per cent, December at 25.8 basis points and 89 per cent, where 25.8 is 103.2 per cent of a single 25 basis point move. The mismatch was ours and it was scope, not units. Add the two per-meeting probabilities one reader published yesterday from the same curve, 15 per cent for October and 90 for December, and you get 1.05 expected increases, or 26.25 basis points of cumulative tightening. The residual against 25.8 is 0.45 of a basis point. The two readings we had assumed both fail: as a December probability it is impossible, and as a December increment it misses by three points. Then Reuters polled 100 economists on 16 to 20 October: 94 expect a hold in October, all 100 expect a December increase, which is 1.06 increases or 26.5 basis points. A hundred forecasters and the futures market are 0.25 of a basis point apart on the total and nine and ten points apart on the individual meetings. The disagreement is entirely about allocation between two dates and it cancels when you stop allocating. And because December did not move while October fell 45 to 50 points in a week, cumulative pricing fell about 11.9 basis points: the hike was not postponed, half a hike was removed. Tokyo traded 36 pips, 158.03 to 158.39, with the session high 18 pips under the 158.57 200-day average.

The Market Doubled October on One Print. December Did Not Notice.

Four feeds put an October Fed increase at 16, 19, 19.4 and 20 per cent before yesterday's CPI.

Four hours after it, one reading of the futures market had 43.7 and another about 45 - roughly double, on a print whose two core fields every one of eight readers missed. But the October number is not the finding. The same feed's cumulative December buckets sum to exactly 100.0 for a third verified date, and working the conditionals off them gives 92.45 per cent for a December increase following an October one and 92.36 per cent following an October hold. The two differ by 0.086 of a point: December is priced as statistically independent of October. Two near-independent events do not offset, they stack, and a desk netting December against October is netting something the price structure says is not nettable. Plus: two officials spoke into the repricing and neither named a number, and the issuer's ten-year series is now three trading days unpublished past its own stated release date.

The Summary Answered Our Question and Ignored the Market's. October Fell Below Twenty Per Cent.

The Bank of Japan's September Summary of Opinions is full of hawkish views and the yen fell half a per cent on it, because it said nothing about October.

What it did say is that the neutral rate should be reassessed after every hike rather than assumed fixed — which discharges the terminal-rate question we opened on 28 September. October odds are below twenty per cent on two post-event readers; a third is excluded because it predates the release. And our 4.77-yen Tankan gap was 3.11: the assumed rate moved to 154.23.