Daily Market Commentary 11th August 2022

US inflation missed expectations, falling to 8.5%, sending equity markets into heaven and the US Dollar lower. US CPI had hit a record 9.1% last month and expectations were for a fall to 8.7%, but the news was better than expected, relieving pressure on the Fed and follows the latest robust Non-Farm Payrolls number. Much of the fall is gas (petrol) prices, which contracted 7.2%, while food and shelter continues to rise. This was good news for the economy and if sustained over a quarter, or more, may mean that inflation has peaked? The wage pressures, supply-chain problems and the ongoing energy crises will ensure that this may be very, very difficult.

German inflation came in at 7.5%, in line with expectations, but this remains the key issue in the EU. The European sanctions remain and exaggerate the damage the energy crises is having on cost-of-living pressures. The falling Dollar allowed the EUR to jump above 1.0300, while the GBP surged above 1.2250. Chinese CPI/PPI remained contained, although concerns over the Japanese PPI, which starting to rise, pushing up to 8.6%.

The plunging reserve allowed the commodity currencies to flourish. The AUD vaulted to 0.7100, while the NZD blew through 0.6400, as attention and focus remain on Central Banks and interest rates. The US PPI number will be followed closely, when released tonight and is expected to show a slowing increase in input prices.