US February core CPI came above estimates

Wall Street finished Tuesday’s session with 1% and 2.14% gains. Inflation in the United States (US), as reported by the Department of Labor (DoL), was lower than forecasts on annual figures. However, on a monthly basis, the Consumer Price Index (CPI) ticked down from 0.5% to 0.4%, but core CPI rose above estimates of 0.4% at 0.5%.

Recent turmoil in the US banking systems plunged US Treasury bond yields, particularly 2s, which fell 100 bps in two days. However, backstop measures implemented by the US Federal Reserve (Fed) have calmed investors, as shown by the market mood.

Given the backdrop, speculators have begun to price in a less aggressive Fed. The swaps market estimates the Fed would hike 25 basis points at the upcoming March meeting and is seeing rates peaking at the 4.75% - 5.00% range.

Consequently, US Treasury bond yields recovered some ground and underpinned the US Dollar. The US Dollar Index, a measure of the buck’s value vs. a basket of peers, finished the session with minuscule gains of 0.03%, at 103.659, and capped the USD/CAD rally.

Another reason that helped offset the Canadian dollar gains as oil prices collapsed by 4%, as shown by the US crude oil benchmark WTI. WTI finished the session losing 4.30% at $71.44 per barrel.

In later news, a crash between a Russian fighter jet and a US drone caused a dip in US equities, though most indices pared those losses and finished higher.

The lack of data in the Canadian docket kept investors leaning on the US Dollar dynamics, sentiment, and oil prices. On the US front, the economic calendar will feature the Retail Sales, the Producer Price Index, and the New York  Empire State Manufacturing Index.