Fed's Bullard wants rates at 4% by Dec

The Federal Reserve will be prepared to hold interest rates "higher for longer" should inflation continue to surprise to the upside, and market pricing will need to adjust accordingly, Fed's St. Louis president James Bullard said on Tuesday who wants rates at 4% by the end of the year. 

US CPI in focus

Meanwhile, investors will be fixated on the US inflation data coming out in the \us session later today. Prices likely rose by a level that will prompt further interest rate hikes from the Federal Reserve. Combined with last week's NFP report, the Fed is expected to hike interest rates by another 75 basis points at the next Fed meeting in September.

''While a slowing headline reading could lead some investors to believe the Fed can stop hiking, we expect the Fed to take rates to 3.75% by December,'' analysts at TD Securities argued, given that the consensus is that CPI will have risen less in July by comparison to what June's reading showed, 9.1% vs. 8.8% expected whereas tomorrow's data is expected to come below 9%. 

The US 10-year yield, illustrated on the daily chart above, has corrected towards the neckline of the W-formation on the daily chart within the lower boundary of the broadening formation.

In turn, should the price hold above the flagged levels on the chart above, then a break of the trendline resistance could result in a rally in yields