Daily Market Commentary 11th January 2023

Markets were flat overnight, amidst comments from the Federal Reserve members and resurgent economic confidence for the New Year. The Fed Chairman Powell discussed the importance of the independence of the Federal Reserve, free from political influence, ignoring commentary on monetary policy, while one of his colleagues was more forthcoming. Fed member Bowman came out and was aggressively hawkish, reinforcing the need to hold the line on interest rates and liquidity, in the war on inflation. The Fed have been consistent and committed to their strategy, which appears to be working, so are unlikely to relent. The US will look at the latest CPI number, this coming Thursday, which will result in another round of speculation. German Industrial Production continues to weaken, while the France is moving into more positive territory, with energy prices the key to industrial activity. The EUR consolidated above 1.0700, while the GBP drifted lower, to trade 1.2150.

Commodity currencies also came off recent highs, with the AUD falling back below 0.6900, while the NZD drifted back to 0.6350. Japanese inflation data confirms rising pressures, with headline and core Tokyo inflation, both hitting 4%. This is very high for Japan and is the reason the Bank of Japan is looking to address inflation, before it becomes a real problem. They have successfully kept a lid on inflation, despite extremely loose monetary policy, preferring direct intervention in bond and currency markets. All eyes turn to the US inflation data.