Daily Market Commentary 11th November 2021

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Inflation in the USA, blew through all expectations, soaring to 6.4% pa,  to a more than 30 year high. The number was a blow-out, but not completely beyond expectations, considering the monetary and fiscal policy in the world’s largest economy. This is certainly not ‘transitory’ as the Fed has been want to label it, for a very extended period of time? This is likely to accelerate further, as the regime in charge, just passed the enormous USD$ 1.2 Trillion infra-structure (Green New Deal) spend-athon. This will force the Fed to change the narrative, taper QE and raise interest rates, much sooner than expected. US Bond Yields jumped, while the US Dollar surged, with the prospect of higher interest rates and limiting the liquidity in the monetary system. The GBP collapsed to trade 1.3450, while the EUR tests 1.1500, on the downside.

Chinese CPI inflation more than doubled to 1.7%pa, but the real problem remains contained, until you look at input prices. Chinese PPI surged to 13.5% pa, which will feed directly into the inflation rate and cost of production. This is a global crises, exasperated by the energy crises, which will lead to a global monetary crises. The consequential surge in the reserve, sent the NZD crashing back through 0.7100, while the AUD fell below 0.7350.

Inflation remains the kryptonite of modern monetary theory.

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