Daily Market Commentary 11th February 2022

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The much anticipated US inflation data blew away expectations and hit yet another 40 year high, surging to 7.5%pa. The surging energy and fuel costs are driving rampant inflation throughout the US economy, which is fast becoming a serious political issue. Fuel and energy drive all costs higher and that is exactly what is happening across the globe, as Governments attempt to switch off the cheapest and most efficient fossil fuels and move into mush more expensive, but less reliable, renewable energy sources. The surge in inflation will force the Federal Reserves hand, which may see them raise rates by 50 basis points in March and turn off the QE tap completely? US 10 Year Bond Yields blew through the important Big number of ‘2’, pushing up to 2.05%, which drives the cost of money higher. The surge in bond yields had little impact on the US Dollar to date, with the EUR moving up to 1.1460, while the GBP broke above 1.3600.

The resurgence in commodity currencies continued, with the NZD blasting through 0.6700, while the AUD approached 0.7250 before calming down, following the US CPI number. Australian Building Permits rose 8.2%, while Japanese PPI hit 8.7%, impacting input costs, but not translating into inflation, due to lack of real growth in the economy. The shocking US CPI number, will drive economic and political fears amongst market participants and voters, forcing the economic and political narrative.

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