eFXdata reports that MUFG Research discusses its reaction to yesterday' drastic upside surprise in US CPI print for the month of April.

"There were upside risks heading into this inflation print and we were yesterday deliberating market responses to a 0.3% m/m core CPI print versus a 0.4% print. So the 0.9% m/m gain was a complete shocker and way off the scales."

"The problem is that the expectations of the extent of this transitory jump in inflation have now shifted and this will result in two developments. Firstly, greater doubt over the long-term consequences – if the jump is now going to be considerably higher than expected, the longer-term implications will be more uncertain. Secondly, market participants’ faith in the communications of the Fed will be considerably less predictable."

"Still, we do not see this as a reason for a fundamental re-assessment of our core view."