US Equities rallied to record levels overnight after the important US inflation number was released. The CPI number for July was 0.5%, or 5.4% annually, which was in line with expectations. This number was not a blow-out increase, as we have seen over the previous couple of months and allowed some support for the Fed’s position that inflation is ‘transitory’. The annual rate is still extremely high, some consider peaking, but the trend has been strongly against this narrative. The US PPI number, to be released tonight, is expected to be 7.3%, so this will now become the focus of attention, in relation to inflationary pressures in the economy.
German Inflation hit 3.8%, up from 2.3% annualised, which reflects the big cost pressures. PPI input prices are directly converting into headline inflation, on an under-performing economy. The EUR managed to hold above 1.1700, while the GBP pushed back to 1.3870, ahead of key economic data releases. The UK is expecting headline GDP, Industrial/Manufacturing and Construction numbers, which are expected to begin to reflect the economic re-opening.
Commodity currencies reflected a softer reserve, with the NZD pushing up to 0.7030, while the AUD consolidated above 0.7350. Key inflation data in Australia, New Zealand and Japan released today may influence trade in local markets.