Bonds reel as hot inflation fuels jumbo Fed hike fears

Government bonds sold off sharply after a hotter-than-expected inflation reading raised expectations that the Federal Reserve could deliver a larger-than-usual rate increase. The core transmission channel is inflation repricing: stronger price data lifts the expected path of policy rates, pushing front-end and longer-dated Treasury yields higher as prices fall. The U.S. dollar is the most directly exposed asset, since a wider rate differential against peers tends to attract capital inflows and strengthen the currency, while rate-sensitive equities and gold typically face pressure from higher real yields. Traders will focus next on the upcoming producer price index release and the Fed's next policy decision, as either confirmation or softening of inflation momentum will determine whether the jumbo-hike pricing holds.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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