Markets were flat overnight, following massive rallies early in the week, now settling ahead of the release of key US inflation data. Global equities have brushed off the latest variant of the virus and regained all of the losses suffered from panic-selling, triggered by the latest outbreak. The ongoing cycle of variant virus announcements and emergency reactions from political leaders, needs to be broken and allow people and economies to return to normal. The key inflation data out of the US tonight will dictate how markets close the week. The US CPI is expected to rise from 6.2%pa, to up to 7%pa, which would be a near 40 year high! This would force the Fed into much more urgent action on monetary policy. They have already signalled that QE tapering would be brought forward in volume and timing, while interest rate rises will become part of the solution sooner than originally planned. US Bond yields drifted lower and the US Dollar gained some upward momentum, with the EUR falling back below 1.1300, while the GBP is testing 1.3200 on the downside.
Commodity demand also was softer and this directly impacted the associated currencies. The AUD fell back below 0.7150, while the NZD crashed below 0.6800, following a contraction in Manufacturing Sales. All markets will focus on the US CPI number and the speculation regarding the Federal Reserves response.