The increase in factory production reflects rebounds in output of both business and construction supplies, adds to signs of a recovery in manufacturing.

The core CPI rose from a year ago by the least since 2021, and traders boosted bets that the Federal Reserve will cut interest rates three times this year.

"The January payrolls report lessens the urgency for the Fed to cut rates, but as we expect inflation to ease in coming months, we think policymakers have room to cut rates to support the labor market recovery."

Some have worried that the dollar's tarnished status as a safe haven and the country's large budget deficits would drive foreign investors away, but at present they don't seem to be selling off U.S. Treasuries.