US inflation was much softer than expected, according to the latest PCE inflation indicator, which is the Fed’s preferred measure. Inflation was expected to spike to 3.7%, but held steady at 3.4%, offering relief to the bond market and the Fed. US GDP also spiked to an annualised 2.2%, revealing a robust economy, coping well with the energy crisis. The same cannot be said for Europe, with inflation readings from France and Germany showing big surges. Inflation jumped to 3.4% in France (from 2.6%), which is monumental, considering the contained levels throughout the year. German inflation also spiked to 3.3%, from 2.9%, and European bond yields hit record highs. A crisis is looming. The EUR was steady, trading 1.1330, while the GBP pushed back above 1.3250.Commodity currencies remain under pressure, with the AUD stumbling to 0.6950, while the NZD was steady on 0.5640. The Australian CPI inflation reading was 4%, in line with expectations, but elevated and the reason the RBA raised rates. The AUD remains vulnerable.
