Daily Market Commentary 10th August 2022

Markets await key inflation data, set to be released tonight, from Germany and the USA. Inflation in both jurisdictions is expected to show a decline from record peaks, thus easing the pressures on Central Banks and the economy. The strong Non-Farm Payrolls number has allowed the Fed to continue the aggressive interest battle to contain runaway inflation. If inflation has peaked then markets may perceive the Central Bank is winning the battle. If inflation remains around record levels, then the realisation that this could be an extended period of high interest rates, may dampen market enthusiasm. The real problem lies in the massively expanded Fed balance sheet, from excessive QE, over an extended period of time. This is likely to get worse and not better, as the Fed buys up Government debt to fund massive fiscal deficit spending, which is the root cause of the problem. The EUR traded around 1.0200, awaiting key German CPI numbers, while the GBP traded 1.2080.

The NZD drifted back to 0.6270, following a sharp fall in consumer confidence, while the AUD traded around 0.6950. Markets await key European and US inflation data, while local markets look towards the release of Chinese and Japanese inflation numbers, scheduled for today. Markets will welcome a decline in inflationary pressures, although a miss to the upside, could cause a significant reaction.