Daily Market Commentary 11th January 2022

Global equities plunged, to begin the new trading week, as the reality of the new monetary environment hits home. The Federal Reserve has been forced to recognise the dire inflationary situation the economy is in, as it is killing the current administration, politically. The first step is to recognise the problem, which they now have done, and then they need formulate the strategy out of this mess and execute. The Fed have forecast at least three rate rises for 2022, while they will reverse QE (to become QT), cutting the liquidity in markets. This will test the swollen asset bubbles.

US CPI and PPI will be released this coming week, with inflation expected to top 7%, blowing away recent records. US bond yields have been on fire this year, so far, with the 10 Year charging towards 1.8%. The US Dollar has been supported by the surging interest rates, with the EUR falling to 1.1330, while the GBP fell below 1.3550. Commodity currencies were also damaged by the resurgent reserve, with the AUD falling to 0.7150, while the NZD slipped to 0.6740.

All eyes remain on the US CPI and PPI numbers.