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Yesterday’s US CPI report was worse than expected at 3.5% YoY. The shockwaves were felt almost everywhere. 10 yr Treasury yields were up which sent UK gilts and European bond yields up, and pushed the 10 yr JGB above 0.8%. Equity markets corrected and expectations for rate cuts smoothed in The US. In Europe, as can be seen below, they remain elevated for the June meeting, after having a more benign inflation report. The JPY weakened to historical levels at 153.14. Investors are starting to realize that the probability of immediate rate cuts is fading, and inflation may be stickier than expected. Expect more speeches from Fed officials trying to calm the markets and further markets adjustments.

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