(Bloomberg) — The dollar has scope to extend gains and stocks are likely to keep falling if US inflation data Wednesday show a further acceleration, according to strategists.
Other predictions include further inversion of the US yield curve, renewed weakness in the yen and the euro finally being pushed below parity with the greenback.
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The U.S. midterm elections sparked declines for shares of large U.S. technology companies and oil prices that fueled gains for U.S. government bonds, sending yields to the lowest levels since early September.
A split Congress has often been a bullish recipe for Treasuries. Benchmark 10-year yields have been lower on average one and 12 months after midterms that produced such a result.
It's the same task the Fed chairman fumbled in July, when investors took a rate hold in stride but balked at Warsh's unwillingness to signal borrowing costs might need to move higher.
Traders were pricing in about a 35% chance the Fed opts for an interest-rate hike later this month after U.S. producer prices rose in September at the fastest pace in more than four years.
Traders priced in a roughly coin-toss probability that the U.S. central bank boosts rates at its October meeting after consumer prices advanced at the fastest pace in five months.
