CPI report shows signs of wage growth

Wage inflation is probably the key factor in the US -- if not global -- economy at the moment and there was a great signs in the January CPI report.

Real weekly wages rose 1.2% in the month compared to 0.3% expected. It's the best single month of wage growth since 2008.

More than anything else, this metric drove the US dollar rally after the data and will continue to drive it. EUR/USD immediately fell to 1.1294 from 1.1320 on the data.

The bond market also reacted with US 5-year TIPS breakevens rising to 1.52%, the highest since late November. That's still well below the Fed's target but it's moving in the right direction and will solidify the Fed belief that something is skewing breakevens that can be ignored.

The rise in wage inflation is only one month but if Yellen seen this report, she may have been more hawkish at Humphrey Hawkins. When the Fed hawks see it, they will be practically frothing.

For me, this ensures that 'patient' will be removed from the statement in March and it keeps a rate hike in June on the table. In the rest of the economic data, the durable goods report showed some signs of a pickup after a weak string of reports and that will also comfort the Fed.

The US dollar continues to look very attractive.