US indexes finished mixed with early gains on a post CPI honeymoon and a soft PPI were erased during the session as investors realised they may have become too optimistic about a Fed pivot, with the drift lower in risk coinciding with a sharp rebound in bond yields.

The closely watched 50% fib retracement level from the January all-time high to Junes bear market lows at 4220 on the S&P 500 was tested for the first time, but the bulls failed to hold it as the rally fizzled. This level is an important one as there has never been a bear market rally that closed above the 50% fib that subsequently went on to make new lows.

10-Year yields dipped on the lower than expected PPI figure but rebounded sharply on traders repricing Fed rate expectations, dragging down equities and showing that the Fed is still in the driving seat in regards to the recent stock market rally and it’s future direction.

The US Dollar was mostly softer with EURUSD testing the post-soft CPI highs and AUDUSD breaking through the 0.71 USD level.

This did not help gold though, with rising bond yields and lowering of inflation expectations weighing on the precious metal, sending it to session lows, with the 1800 level proving stiff resistance.

In the crypto space, Ethereum led the charge higher as investor optimism grows for a successful merge into ETH 2.0, scheduled for September 15. ETHUSD was last trading around $1,900 more than doubling from its June crash lows and sending the BTC/ETH ratio below 13, a level not seen since January.

In economic releases, Sterling traders will be watching the UK GDP released today at 06:00 GMT