Global markets experienced significant volatility on Wednesday. Although the closely watched US CPI report came in largely in line with expectations - momentarily easing fears of a deep stagflation scenario - the relief was short-lived.

A renewed surge in crude oil prices combined with extremely weak demand at a US Treasury auction pushed bond yields sharply higher. This sudden shift in the macro backdrop triggered a strong rebound in the US Dollar while putting renewed pressure on US equities.

The February US Consumer Price Index delivered results that matched market forecasts, briefly calming the stagflation fears that intensified after last week’s unexpected -92K Non-Farm Payrolls print. For a short period, markets interpreted the data as a sign that the Federal Reserve may still be able to guide the economy toward a soft landing.

• February Core CPI: 2.5% YoY | 0.2% MoM

• February Headline CPI: 2.4% YoY | 0.3% MoM

However, the bond market quickly disrupted the optimism. A poorly received US Treasury auction signalled weak investor demand for government debt, forcing yields higher as investors demanded greater compensation for holding Treasuries. Rising inflation risks tied to ongoing Middle East tensions have further amplified these concerns.

The sharp increase in Treasury yields rapidly altered capital flows across markets. The US Dollar, which had been drifting lower ahead of the CPI release, staged a strong rebound as higher yields improved the attractiveness of USD-denominated assets.

Meanwhile, US equities faced renewed selling pressure. Higher borrowing costs driven by rising yields, coupled with elevated energy prices, create a challenging environment for corporate profitability - particularly within the technology sector.

The US Dollar Index (USDX) attracted strong buying interest near the 98.60 - 98.80 support zone highlighted previously. The yield-driven rebound has pushed the index back above 99.00, neutralising the recent bearish momentum.

This move reopens the path toward the 99.30 resistance level. However, ahead of Friday’s PCE Price Index release, upside momentum may remain limited in the short term.

US equities bore the brunt of the yield surge. The Nasdaq 100 failed to maintain its recent recovery and reversed sharply lower.

The index is now approaching the 24,750 - 25,000 support zone, a level previously identified as a critical floor. A decisive break below this region would reinforce the prevailing bearish structure and could expose the index to a deeper decline toward the 24,000 liquidity zone.

Just as macro concerns briefly eased, the energy market reasserted itself. Crude oil prices surged once again, reflecting the persistent geopolitical risk premium stemming from the US-Israel-Iran tensions.

With the Strait of Hormuz still facing potential disruption, institutional hedging demand continues to support oil prices, with buyers stepping in aggressively on any pullbacks.

Brent Crude (UKOUSD) maintains strong bullish momentum. After briefly consolidating to fill its previous gap, prices have surged back toward the $100 level.

As long as Brent holds above the $95 support zone, the broader technical outlook remains bullish, with $108 emerging as the next major upside target.

US Initial Jobless Claims (8:30 AM ET)

Following last week’s weak NFP report, markets will closely monitor unemployment claims for further signs of labour market weakness. A sharp rise in claims alongside strong PPI data could quickly reignite stagflation concerns.

Treasury Yields and Oil Prices

Movements in the US 10-year yield and crude oil will remain key drivers. If both continue rising simultaneously, US equities may face additional pressure while the US Dollar maintains safe-haven support.

Navigating and trading the forex markets requires clarity, discipline, and access to reliable insights. Ultima Markets is committed to providing data-driven analysis to support informed trading decisions.

Join Ultima Markets today and stay connected with us by following us on social media for the latest news, events, and product updates. Visit UM Academy and access unlimited educational trading resources to help you master the markets.

—–

Trading leveraged derivative products carries a high level of risk and may not be suitable for all investors. Leverage can magnify both gains and losses, potentially resulting in rapid and substantial capital loss. Before trading, carefully assess your investment objectives, level of experience, and risk tolerance. If you are uncertain, seek advice from a licensed financial adviser. Leveraged products are not intended for inexperienced investors who do not fully understand the risks or who are unable to bear the possibility of significant losses.

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.