The Federal Reserve Chairman Powell appeared before Congress to fulfil his semi-annual obligations. The Central bank leader was predictable in his assessment of the US economy and his diagnosis, in terms of monetary policy. He indicated that inflationary pressures would moderate, as the supply chain returns to normal, and record low interest rates and QE Infinity would continue for the foreseeable future. This was expected and accepted by markets, as bond yields retreated from the previous nights gains. The massive CPI number released the previous day (5.4% p.a.) was reinforced by the release of the US PPI number, which has spiked to 7.3%! This will only continue to feed the inflationary pressures within the economy.
Market confidence in the Federal Reserve may be vindicated, in which case their is no major problem, but history reveals inflation to be as resilient and determined as cancer. The EUR traded 1.1830, despite a contraction in Industrial Production, while the GBP drifted to 1.3860. The RBNZ is not the holder of the worlds reserve currency and therefore must consider money supply and foreign exchange reserves. These extra considerations, in monetary calculations, forced the RBNZ to change tactics. The RBNZ left rates unchanged, but signalled an end of QE, which opens the door for interest rate rises anon. The NZD shot up on the news, surging through 0.7000, while the AUD traded 0.7480. Local markets keenly await the Australian Job numbers, which have been very strong until the latest iteration of lock-downs, while the Chinese GDP may give some incite into the ‘Worlds factory’ production and growth?