Markets await the all-important FOMC rate decision and accompanying Q&A. The Fed are expected to raise rates by 50 basis points, following 4 super-rate rises of 75 basis points, but it will be the tone and narrative that moves markets. The US inflation CPI number was softer than expected, falling from 7.7% to 7.1%, indicating possible ‘peak-inflation’ may have been reached? The go-hard hawkish attitude of the Federal Reserve and softer energy prices have combined to address surging inflationary pressures, but energy prices must be watched closely, as they are a key driver. UK inflation also softened to 10.7%, while the German CPI was bang on 10%, both heading in the right direction. The inflation curve is bending in the right direction, but we are still seeing increases in CPI every month, the war is not over. The Fed will announce shortly and then hold a Q&A, while the Bank of England, ECB and Swiss National Bank, will all follow tonight. The EUR held onto it’s recent rally, trading 1.0650, while the GBP trades above 1.2400.
Commodity currencies held onto gains, with the AUD trading 0.6850, while the NZD drifted to 0.6440, following some disturbing Current Account numbers. NZ Q3 Current Account blew out to NZD$14.7B, annualised to NZ$29.7B, almost double the previous worst reading during the GFC. The precipitous rise in imports of Goods & Services has been nowhere matched by Imports, due in large part to Oil and Gas and the exchange rate. The rating agency S&P have issued a warning that it is now a ‘key credit risk’. Market attention is focused on the Federal Reserve and the Q&A.