Inflation in no hurry to come down, and neither is the US dollar
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Why is global inflation staying high and how does it affect the US dollar?
Well, it seems inflation in many parts of the world isn't coming down in a hurry. US CPI overnight ticked up a little bit. Not unexpected and not enough to stop the Fed from cutting next month. In fact, expectations for that seem to have risen slightly. Aussie wage inflation slowed a little more than expected, but not enough to encourage the RBA to move in a hurry. Wages are still rising more than inflation. I'll tell you what else isn't coming down. The US dollar, the one, is one of the many casualties on that. And Bitcoin isn't coming down either. It just keeps on rising higher and higher. Forever, possibly. At least that's the way everyone seems to be acting. It's Thursday, it's the 14th of November, 2024.
It's the morning call from NAB. Good morning. Yeah, surprise, surprise. The US dollar is up again, up 0.5%, up to 106.5 on the DXY index. The Aussie disproportionately weaker again. It's down 0.8% to 64.8 US cents. The euro is down 0.6%, a third of a percent off the pound. Bond yields high again, up two basis points for 10-year treasuries. up to 4.45%, up three for German 10-year bunds, two in the UK, and same for France. Aussie 10 years yesterday, up 10 basis points to 4.66%. Not relenting on that on futures now, at one more basis point. And US shares, well, they were back on the rise. And then they dropped away rather quickly towards the close, with the Dow finishing up 0.1%, less for the S&P. The Nasdaq down 0.25%, and the Russell 2000 is down 0.9%, quite a sharp turnaround because it was up 0.6% an hour or so out from the close.
What did the latest US CPI numbers reveal about inflation trends?
Consumer discretionary doing well. It's up 1.2%. Healthcare and utilities are all doing well. Coms is down. In Europe, well, the Eurostoxx 50 is down 0.1% at close. The FTSE 100 is up 0.1%. Yesterday, the Nikkei down 1.7%, the CSI 300 up 0.6%, and the ASX closed down three quarters of 1%. Let's see what it does today. An oil back on the rise. Well, it was until the last hour. Something else that's turned around. It lost a bit of gusto late in the trade yesterday. Then it was back up for most of the session overnight. But now, well, Brent is flat at 71.90 a barrel. WTI has fallen 0.2%, so that is good. Quite a turnaround. And spot gold down 0.9% as well. Bitcoin, well, it was almost 5% up on yesterday in the middle of the session today, getting well over the 90,000 mark.
In fact, it got over 93,000 and, you know, seemed to be careering towards 100. You know, extraordinary. What could possibly go wrong? Well, I'll tell you what's gone wrong. It started to fall. Now it is just 2% up on yesterday. Nabs Taylor-Nugent is with me today. So absolutely no surprises with the US CPI. The core CPI up 0.3% month on month. The headline year on year goes from 2.4% to 2.6%, which of course means it's heading in the wrong direction.
How are market expectations for a December Fed rate cut changing?
But it was expected and it looks like the markets have reacted as if to say, well, thank God it was expected. It wasn't worse.
Yeah, no, I think that's right. There's certainly, you know, when you look at the market reaction to that, as expected print, it looks like, you know, markets more comfortable with a December cut that's now 21 basis points priced up from around 15. And you've seen two-year yields a bit lower off the back of that as well. So it certainly does look like markets were braced for bad news in the December CPI. And they didn't get it necessarily. It's kind of continued on that theme of 0.3% for the core rating, which is not as good as the kind of numbers that we were seeing three months ago, but not enough for- the Fed's kind of characterization to shift, I think. And so, that all kind of continues to see things line up that another cut in December is looking reasonably likely, but there is a little bit more data to go before we get there.
And I think what you're seeing from from FOMC speakers recently is that they're a bit more cautious. And so, the case for a pause, maybe the data doesn't have to try as hard to make that case, certainly as we look out into the first couple of meetings of 2025. But the December data You know, it just wasn't bad enough to change that near-term assessment, so I think keeps them on track.
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Chapters
8 chapters
1
Why is global inflation staying high and how does it affect the US dollar?
0:01–1:36
2
What did the latest US CPI numbers reveal about inflation trends?
1:36–2:57
3
How are market expectations for a December Fed rate cut changing?
2:57–5:29
4
What is the impact of the Australian Wage Price Index on RBA policy?
5:29–8:20
5
Why is the Chinese yuan weakening and what is the PBoC doing?
8:20–10:22
6
How are commodity prices like oil and gold reacting to recent data?
10:22–12:45
7
What are the key take‑aways from Jerome Powell’s Dallas Fed speech?
12:45–15:04
8
Which upcoming data releases could shift market direction this week?
15:04–16:48