Daily Market Commentary 14th September 2022

The all-important US inflation number came in hotter than expected, blowing away market expectations and sending markets crashing. Global equities took another huge step lower, while US Bond Yields shot up, leading to the safety of the US Dollar. Markets were expecting inflationary pressure to ease considering the falling oil prices, but core inflation rose sharply, revealing inflation was much more widespread than the energy sector. US CPI came in at 8.3%, sharply above the expected 8.1%, but still lower than July. It was the sharp rise in core-inflation (excludes energy and food), from 5.9% to 6.3%, that has shaken markets. US 10 Year bond Yields reached for new highs, driving the US Dollar higher, with greater expectations that Central Banks will continue to raise rates in big chunks.

The EUR crashed back below parity, while the GBP plunged back towards 1.1500. The ECB is way behind other Central Banks in attacking inflation, which will probably result in inflationary pressures continuing to rise in the EU, not just relatively. German CPI came in at 7.9%, another record high, while the important ZEW Economic Sentiment report collapsed into negativity. Europe and the UK face severe and deepening recession, as the energy crises is joined by a food crises, coming into the winter season.

Commodity currencies suffered the rising reserve, with the AUD plunging towards 0.6750, while the NZD may test 0.6000? NZ Food inflation data rose 8.3%, reflecting global inflationary pressures, with the global recession hitting commodity demand. The spiral in inflation is smashing the consumer and disposable income, which is driving recessionary pressures more broadly.