Daily Market Commentary 14th September 2023

US inflation reversed course, and rose in August, further than expectations. Inflation has been falling in the US at a precipitous rate, for the last couple of months, so a sharp reversal was not welcomed by markets. US inflation rose to 3.7%, boosted by food inflation costs, while core Inflation continued to fall. This will probably allow the Fed to ‘hold the pause’ as core inflation remains a key component of the Central Banks considerations. Markets were uneasy with the sudden heating up of inflation, in the US economy, as energy prices are steadily rising, heading into the cooler seasons. UK GDP contracted sharply (-0.5%), while Manufacturing and Industrial Production both contracted in July, confirming the deepening economic recession. European Industrial Production contracted 1.1% for July, as the rapid de-industrialisation of the European engine-room (Germany) continues. European Bond Yields are steadily rising, ahead of the ECB meeting tonight, but expectations remain, for the Central Bank to hold rates unchanged. The EUR held above 1.0700, while the GBP traded below 1.2500, following the extremely bleak economic data.

Commodity currencies stabilised, with the AUD holding above 0.6400, while the NZD looked to regain 0.5900. Market attention will turn to the Australian Employment data, set to be released today and then the focus will turn to the ECB and their rate decision. The economic narrative arising from the ECB meeting, will be important and in the US, attention will turn to PPI data.