Daily Market Commentary 11th April 2024

US CPI inflation data was hotter than expected, reversing the trends lower, spiking up to 3.5%. This combined with the Fed Minutes, confirming the need to hold rates ‘higher for longer’, until inflation returns to 2%, or below. This had an immediate impact on markets, with bond yields and the US Dollar all gapping upwards, while US equities tumbled lower. Markets are now not expected any interest rate relief until the second half of the calendar year. The surge in US Bond Yields, supported the stronger US Dollar, with the Yen collapsing towards 153.00. Europe appears to be dealing with inflation much better, by slamming their national economies into deep recession and this was reinforced by the latest Norwegian inflation reading. Norway’s inflation plunged to 3.9%, from 4.5%, copying other EU nations. The EUR crashed to 1.0730, while the GBP slumped back towards 1.2500.

The resurgent reserve reversed recent gains in commodity currencies. The RBNZ left rates unchanged in NZ, but talked a big game, about holding rates higher and squeezing out inflation. This has the desired impact on the NZD, which initially pushed upwards, but the news from the US on inflation, destroyed that narrative. The NZD crashed back to 0.5970, while the AUD looks set to test 0.6500, to the downside. Inflation fears and warnings over the Chinese economy from ratings agency Fitch cast a pall of gloom over markets.