The US inflation CPI number was even softer than expected, coming in at 7.1%, crashing down from 7.7%. This was great news for markets and US equities immediately spiked, while US Bond Yields flattened and the US Dollar crashed. The EUR zoomed up above 1.0650, while the GBP flew through 1.2400, amidst the market rally. The good news was a risk-on trade and markets opened up with a surge of confidence. The massive spike in equities did not last longer than the trading session, as the DOW gave up all 700+ points of gains, with the realisation that the Fed will, in all likelihood, continue to raise rates. Inflation is still incrementally rising and energy prices, although heading south, remain an existential threat.
Commodity currencies were beneficiaries of the renewed market confidence and the flagging reserve, with the AUD rallying towards 0.6900, while the NZD attacked 0.6500. Market realisation, later in New York trade, had a sobering effect on both of these currencies. All eyes are now on the Fed, followed by the ECB, Bank of England and the Swiss National Bank.