Daily Market Commentary 16th August 20121

Markets closed the week flat, after the release of the University of Michigan Economic Sentiment report. There was a massive slump in economic sentiment in the US, a 10 year low, which reflected the pandemic and the political measures employed to counter the virus. The massive expansion of fiscal and monetary expansionism is doing little to relieve the massive incursion on citizens freedoms and economic activity. US equities were charging to new record highs until the report was released, which shook markets players, although this only reflects the ‘ivory towers’

isolation and ignorance.

The narrative of ‘peaking’ and transitory inflation was completely refuted with the explosive PPI number released Thursday. The inflation train is coming down the track, fast and furious. The US Dollar was softer, allowing the EUR to recover to trade 1.1785, while the GBP inched back above 1.3850. Inflation will continue to dominate local markets and close attention will be paid to CPI/PPI data releases.

Commodity currencies arrested recent falls, due to the weaker reserve. The AUD consolidated above 0.7350, while the NZD pushed above 0.7000, following a positive Business PMI number released Friday. A look ahead into the week ahead, will focus on growth inflation and probably the media favourite, the virus.