The US CPI blew away market expectations and triggered a surge in market confidence, with equities rallying strongly and Bond Yields and the US Dollar plunging lower. US Headline inflation fell back to 7.7%, from 8.2% and much lower than even the optimists predicted. Core inflation was also lower, so market expectations are now firmly in place for a pivot/pause, from the Federal Reserve. US Bond Yields tumbled and the US Dollar crashed, with the GBP breaking above 1.1650, while the EUR shot up to 1.0160.
The renewed market confidence and a plummeting reserve, allowed the AUD to charge towards 0.6600, while the NZD looked to regain the BIG figure of 0.6000. The ‘Peak inflation’ would signal a peak in interest rates, with a loosening monetary policy. Energy prices are at the heart of this crises, along with massive deficit/debt spending. Central banks must now clean up their bloated balance sheets and Western Governments must plan a return to budget balances. Europe is a long way from killing the inflation monster, with rising energy demand from Winter cold aggravating prices and the crises.
Local markets will digest the positive US inflation data and look at NZ Business PMI and local Food inflation.