As the market eagerly awaited the release of the US Consumer Price Index (CPI) data, many were left wondering if the US Federal Reserve (Fed) would take action to address the recent surge in inflation. However, the data released on Wednesday showed a more robust labor market and continued support for inflation, leading to a muted reaction in the FX market.

In his speech at Jackson Hole, Fed Chairman Jerome Powell painted himself into a corner with tough language, leaving little room for error in terms of following through on any adjustments. With September FOMC pricing now at just under 23bp, the market is largely expecting a hike to come. However, the data released on Wednesday has seemingly validated the long USD gamma bias that had been present in the market leading up to the release.

Chief US economist Jonathan Pingle noted that it’s not just the higher oil price shock that’s causing concern, but also massive supply chain and other goods price pressures coming from the Iran/Houthi militant issues in the Strait of Hormuz. Unfortunately, the situation in the Middle East has yet to improve, adding to inflationary pressures.

While some may have been expecting a more significant reaction in the FX market given the stronger than expected data, it appears that profit taking may be the dominant theme as the weekend approaches. With a “take the money and run” mentality being the modus operandi, investors may be opting to lock in gains rather than chase after further upside.