Central Banks Are Back (With a Vengeance?) | Australian Inflation Update

Central Bank Focus

With Canada hiking 25bps and pausing to consider, the focus is now on the 3 musketeers - the FED, ECB and BOE.

With the market easing for them, it's difficult to see any justification for not hiking rates further. A pause might make the market believe a pivot is imminent, and with their reputation in tatters already, they have to get it right this time. No change in full employment means higher rates for longer. Powell even namechecking that he would have to cause pain for consumers.

Markets and central banks are now 100% in disagreement in the future direction of interest rates and this will end badly.

Throw in a debt-ceiling fight in the US, a new Bank of Japan regime soon and a bear market bounce in risk assets, it's going to be interesting..

3 musketeers central banks
FED, ECB & BOE

 

Australian Dollar & CPI Update

Failure of my shooting star idea last week brought an extension of the short-term bull channel, with very precise levels now.

AUD / USD daily
AUD / USD daily
Double top | Bollinger Bands
Double top | Bollinger Bands

10 big figures from the low, with a confluence of reasons to take profit /short. Closing above the double top is a higher high and we could get a massive short squeeze.

Meanwhile the cost of living goes up and consumer happiness goes down

Food inflation in Australia becoming engrained
Food inflation in Australia becoming engrained

CPI came in higher than expected

Headline YoY CPI hits 7.8%
Headline YoY CPI hits 7.8%

Annual CPI inflation the highest since 1990

The annual CPI movement of 7.8 per cent is the highest since 1990. The past four quarters have seen strong quarterly rises off the back of higher prices for food, automotive fuel and new dwelling construction. Trimmed mean annual inflation, which excludes large price rises and falls, increased to 6.9 per cent, the highest since the ABS first published the series in 2003.

YoY Trimmed Mean CPI
YoY Trimmed Mean CPI

RBA: the trimmed mean rate of inflation is defined as the average rate of inflation after trimming away a certain percentage (30%) of the distribution of price changes at both ends of that distribution.

Central Banks Are Back (With a Vengeance?)

FED, ECB and Old Lady this week
FED, ECB and Old Lady this week

Important Economic Releases This Week

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No alt text provided for this image
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In Case You Missed It

 

  1. EU debt suffers under competition with sovereign borrowers
  2. Bank of Japan eases bond market strains with loans to banks
  3. Turkey Angrily Cancels Key NATO Talks With Sweden & Finland
  4. Brazil and Argentina to discuss common currency
  5. China leaps ahead on unlocking huge African iron ore deposit