Daily Alert – Wednesday 13th April 2022: First signs of peak inflation?

Mark NugentApril 2022, Daily Alert

Daily Alert – Wednesday 13th April 2022: First signs of peak inflation?

Good morning.

Yesterday saw US Core CPI coming in at 0.3% month-on-month against an expectation of 0.5%. The market took encouragement from this, signalling as it does that maybe, just maybe, the worst of inflation is behind us. Equities moved up and the US 10-Year yield moved down. However, this reading is only one data point, and the market moves soon reversed. But you must start somewhere and maybe this data point is the start.

Similarly, early this morning the Reserve Bank of New Zealand raised interest rates by 50 basis-points against an expectation of 25 basis -points. The Kiwi climbed, but soon reversed and could not post a bullish candle on the one-hour chart. So, the characteristic here is that the markets are moving as you would expect but it’s going to take a lot more data before they are convinced we have this inflation thing tamed.

In the end, yesterday’s risk sentiment was moderately risk-off.

Early this morning, we see signs of risk-on sentiment. The slide in equities has halted and there are indications of some buying pressure. The Japan225, where Wednesday’s cash market is over, has risen by almost a full 14-day ATR. In addition, the JPY is down, and oil and the US 10-Year yield are up. All positive…but it is still early.

We will be back tomorrow.

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