The US Dollar rally fizzled, as did last Friday’s rally in equities, as markets considered the Fed would not over-react to the record inflation numbers savaging the economy. The initial reaction to the record CPI number in the US, was for a 100 basis point raise in rates, but speculation has calmed and so has the surge in the US Dollar. The EUR rallied to 1.0150, while the GBP pushed up to 1.1950, despite all the political turmoil in Europe. The UK search for a new Prime Minister, while Italy’s Government is in it’s own death throws.
NZ Inflation blew through expectations, soaring to a 32 year high of 7.3%, in Q2. The number mirrors what is happening in other Western countries, which are suffering an energy crises, while rising interest rates are driving mortgage costs higher. The RBNZ has been steadily raising interest rates, but to no avail, as yet? The flagging reserve allowed the AUD to regain 0.6800, while the NZD stalled around 0.6150.
Inflation remains the key driver to markets.