Daily Market Commentary 13th September 2022

Markets are anticipating progress on the war on inflation, as indicators point to easing of pressures, while the ECB has finally taken the problem seriously, with a 75 point rate hike. The Federal Reserve has reiterated the war in inflation continues and their commitment is solid. The blue sky scenario will be measured by the release of the US CPI number tonight, which is expected to show an easing of inflationary pressures. Global inflation has been fuelled by energy prices and monetary policy and the US has been addressing these aggressively. Markets are expected the headline CPI number to fall to around 8%, from 8.5% last month.

The surge in confidence has played out in equity and currency markets. Global equities rallied strongly last week and have begun the week strongly, while the US Dollar has been in decline. The EUR has surged back to trade 1.0130, while the GBP has regained 1.1700. The flight to the safety of the US Dollar has receded, at least until the CPI number is released, tonight.

Commodity currencies took advantage of the flagging reserve, with the AUD breaking back above 0.6850, while the NZD consolidates above 0.6100. NZ inflation data will also be released today, ahead of the key US number in tonight’s trade.