• U.S. stock futures recover and dollar retreats as U.S. inflation slows, hinting at a possible Federal Reserve rate cut in December.
• The re-election of Donald Trump has led to soaring bond yields, potentially impeding the path to lower Fed interest rates.
• The drop in Treasury yields puts the dollar under pressure, but it remains near a six-month high against major currencies.
• Commodities recover some losses, with gold and silver prices rising, and crude oil rebounding after hitting a two-week low.

The U.S. stock futures have recently cut losses, and the dollar has retreated. This development comes after data showed that U.S. inflation continued to slow as expected last month, reinforcing traders' belief that the Federal Reserve may cut rates again in December. The Bureau of Labor Statistics reported that the consumer price index rose by 2.6% in October, while the core rate, which excludes food and energy, rose 3.3% - in line with forecasts.

Following these numbers, U.S. futures rose, turning modestly positive, indicating that the major benchmark indices could recover some of Tuesday's decline at the open later. The dollar index edged lower, while short-dated U.S. Treasury yields dropped, as investors piled into two-year notes, which in turn helped gold modestly extend the day's rally.

Robert Pavlik, senior portfolio manager at Dakota Wealth, said, The in-line number is allowing the market to breathe a little easier and to focus more on the positives of less regulation, a potential increase in business. He added, Right now, we're on the glide path to another rate cut. It could get disrupted but right now it looks like we could get another rate cut.

Impact of Trump's Re-election on Bond Yields and Fed Rates

The likelihood of a December rate cut from the Fed has led to a sharp fall in Treasury yields, with two-year notes dropping to a session low of 4.256%, from above 4.36% right before the data. Traders were placing a near-69% chance of a quarter-point cut when the Fed meets on Dec. 18, compared with around 62% earlier on Wednesday, according to CME Group's FedWatch Tool.

The re-election of Donald Trump has led to soaring bond yields on expectations that lower taxes and higher tariffs will increase government borrowing and push up the fiscal deficit. Trump's proposed policies are also seen by investors as fuelling economic growth and inflation, potentially impeding the path to lower Fed interest rates.

However, analysts believe there is more to come as the Republicans sit within striking distance of winning a majority in the House of Representatives and with it full control of Congress. Samy Chaar, chief economist at Lombard Odier, said, We are still in the midst of the repricing of the Trump trade. There was this slight uncertainty around the House, but now we're close to certainty when it comes to a Republican sweep.

Currency Markets and Commodity Trends Amid Economic Developments

In the currency markets, the drop in Treasury yields put the dollar under a degree of pressure, but it remained near a six-month high against a basket of major currencies. The euro was last up 0.1% at $1.0630, still near a one-year low, while the Japanese yen was also weaker on the day but managed to claw beyond the 155 per dollar level to 154.615.

Commodities, which have suffered under the dollar's strength and from concern among investors about the growth outlook in key consumer China, also recovered some losses. Gold rose 0.6% to $2,610 an ounce, recovering from the previous day's near-two month low, while silver rose 0.8% on the day to $30.93 an ounce.

Crude oil also rebounded a touch after hitting to its lowest in two weeks on Tuesday after OPEC cut its forecast for global oil demand growth this year and next, highlighting weakness in China and some other regions. Brent crude futures rose 0.4% to $72.15 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.37% to $68.36.