Raising the bar
Today's news headlines:
‘Inflation surprise puts onus on Fed to hit brakes even harder’. If market reaction is anything to go by, headline US inflation numbers for August were catastrophic. Expectations for a monthly drop in consumer prices were unfounded as falling gasoline prices were heavily outstripped by increases in everything from food and shelter to medical care. Month-on-month core inflation, which excludes food and energy, jumped 0.6% from 0.3% in July. In reaction, the S&P 500 lost more than 4% for its worst day since June 2020, while the US Dollar climbed roughly 1.7% on the day. Markets are now fully pricing 75bps of interest-rate hikes from the Federal Reserve next week, while both Nomura and former Treasury Secretary Larry Summers have called for a jumbo 100bps hike. (Bloomberg)
‘UK inflation rate slips from 40-year high as petrol prices ease’. Keeping with the inflation theme, consumer prices in the UK rose at a marginally slower pace in August, while still uncomfortably high for officials at the Bank of England. The reading might fan expectations that inflation has already peaked, with Liz Truss announcing plans to cap consumer energy bills this winter. The Pound reacted softly to the news, with yield differentials between Sterling and the Greenback set to increase with both the Fed and BoE meeting next week. Interestingly, both producer input and output prices fell unexpectedly, suggesting an easing of future inflation pressures. (Bloomberg)
Risk-off dominated proceedings post-US inflation data as markets digested the prospect of tighter financial conditions. The Yen pulled back against the Greenback after slipping towards the 145 interbank handle, with officials suggesting that intervention in the currency market might be necessary.
UK CPI y/y: 9.9% vs 10.1% previously
UK Core CPI y/y: 6.3% vs 6.2% previously
Eurozone Industrial Production m/m: 10.00am
US PPI m/m: 1.30pm
US Core PPI m/m: 1.30pm
NZ GDP q/q: 11.45pm
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*Indicative interbank rates taken on the day of writing. Please speak to your Dealer to find out the current rates available for you.