Markets were in a state of shock, following the release of the US inflation number, which was expected to show an easing of inflationary pressures in the US economy. The DOW lost nearly 1,300 points and Bond Yields spiked to crises levels, as the CPI number showed increased inflation in the economy. The rise in inflation came despite a fall in fuel prices, with Core-Inflation (excluding food and fuel) spiking, reflecting the widespread and broad nature of price rises in the economy. This ensures the Fed will raise rates by at least 75 basis points in the next FOMC meeting. The EUR fell back below parity, following a contraction in Industrial Production in the EU, while the GBP has looked to hold above 1.1500.
Japanese Industrial Production also contracted by 2%, while the TANKAN report revealed a slump in manufacturers confidence, as input costs skyrocket. The Yen is crashing, approaching 145.00 once again, ahead of key trade data expected to see a big blowout in imports. Commodity currencies suffered the impact of the mayhem from Wall Street, with the AUD crashing back towards 0.6700, while the NZD dipped back below 0.6000. Australian Employment data will be key to domestic trade, while NZ GDP data will be in the spotlight today. NZ GDP is expected to bounce back into positive growth for Q2, thus avoiding a technical recession. The rising inflation and cost-of-living pressures suggest a recession, to the lived experience of the consumer, but the data will tell the story.