Surging oil prices and sinking bonds have decided the Fed need to hike

The US dollar is sizzling today as the market senses that the Fed will have no other choice but to hike rates.Oil is up for the eigth consecutive day and the gains are accelerating. WTI is up $4.25 on the day to $100.42, breaking the key psychological barrier as it continues to explode higher.Yesterday, Trump said the war wouldn't end until after the midterms and the market is taking that as a reason to load up. The eagerly anticipated August CPI report tomorrow was seen as pivotal for the Fed but at these prices, a very hot September CPI is a foregone conclusion as gasoline and diesel prices spike.With the rise in oil, bonds are crumbling. US 10-year yields are up 6.6 bps to 4.90%, which is the highest since 2023. Yesterday, Trump promised to send Americans $5000 checks if Republicans win the House and Senate. Of course, he also promised checks for DOGE savings and tariffs but neither of those materialized. I don't think the market is taking this promise too seriously but it's yet-another sign of the reckless spending from this administration and the complete abdication of the Tea Party movement.Adding to the case for a Fed rate hike on Sept 16 was the PPI report today. It saw inflation at 5.4% compared to 5.3% expected. The prior reading was also revised up by 0.1 pp. Tomorrow's CPI report is expected at 3.4% y/y and 0.4% m/m and this adds a slight upward bias to that reading.  This article was written by Adam Button at investinglive.com.