Markets opened the week strongly, with some supportive data coming from EU PMI, which showed an improvement in the services sector. Chinese Services PMI was also stronger than expected, allowing markets to rally, once again. US Bond Yields continue to rise, which reflects the inflationary expectation and the Fed’s more hawkish recent tones. German inflation spiked higher, to 2.7%, much more than expected and reflecting the surge in winter energy prices in Europe. This is a major concern, but the heart of this particular problem is Geo-Political, with Ukraine gas supplies to Europe being shut down on the 1st of January. This adds further inflationary pressures on what is already a fiscal and monetary disaster area. The US Dollar eased on the news, with the EUR bouncing back towards 1.0400, while the GBP jumped back above 1.2500.The softer reserve allowed some modicum of recovery for the commodity currencies, with the AUD surging back above 0.6200, while the NZD consolidates above 0.5600. Markets will be focused on inflation and the US labour market, for the rest of the week, while speculation regarding Trumps economic policies remain highly charged.
