Daily Market Commentary 15th March 2024

The US PPI number (measure of wholesale inflation) was not only a reversal in the steep downward trend in PPI inflation, but a substantial spike upwards. This directional change in inflation was mirrored in the CPI, released earlier in the week, but largely ignored. These are considered outliers and a temporary aberration, but if the trend is in reverse and inflation is resuming to an upward trend, then this will give serious pause to the Federal Reserve regarding projected rate cuts in the middle of the calendar year. US Bond Yields and the US Dollar both spiked upwards, with the EUR retreating to 1.0880. while the GBP dropped to 1.2730.

The rising reserve hit the rejuvenated commodity currencies, with the AUD falling to 0.6570, while the NZD slipped to 0.6130. The rise in inflation in the US, were it to be repeated in Europe and Asia, would become a serious challenge to lower interest rates. This would be a savage blow to any economic recovery, especially in heavily recessionary Countries in Europe. The US Retail Sales number also missed expectations, with the consumer perhaps feeling the renewed inflationary pressures.