APAC Morning Update - 18/02/21

The NZDUSD opens at 0.7182 and the AUDUSD at 0.7749

We had some big data come in overnight, and some big beats on the back of it. US Retail Sales, which gauges what consumers are spending, came in at a whopping 5.3%. Pre Covid, you are looking at 2002 to get the last time it was such a high number. It is a monthly data set, so can be a little volatile coming off a poor previous month, but last month was only -0.7%, so it is not like it was all just getting back to normal.

Which brings us to inflation, specifically core producer price inflation. Not the main measure, but still important, as if producers are paying more, it will eventually flow into what consumers are paying. This was last month at 0.1%, and expected to come in at 0.2%. It came in at 1.2%. This kind of figure has only been seen once in the last 20 years, and even that was on the back of a month that had previously dropped 1%, so could be taken with more of a grain of salt. Again, the reason this is all so important is a 3 year bond pays 0.23%. Well that is underwater pretty quickly. Who would want to own that? Who would want to buy more? On top of that, what is the Fed going to do about it? Well we know that, they are going to say it is one off, transitory, a good thing and nothing to see here. But what if next months comes in big again? And the month after that? You are going to get a giant portion of a giant market caught on the wrong side, and the implications of that will be felt over the next decade.

The above may sound a bit farfetched, but really it shouldn’t. Every kid at school asks the question, why don’t we just print more money to pay for stuff that we want? Every teacher smiles, and gently explains that you can’t do that because money has no intrinsic value, and if you keep printing, the value of the money will drop, and therefore you wont actually be able to buy more as prices will just increase. Look at Zimbabwe little Timmy, and while you are at
it, start saving a few million for a house…
 
Global equity markets are up: Dow +0.1%, S&P 500 +0.5%, FTSE +2.5%, DAX +0.4%, CAC +1.5%, Nikkei +1.9%, Shanghai +1.4%.

Gold prices are off 1.1%, currently trading at $1,1775 an ounce. WTI Crude Oil prices are up 1.1% trading at $60.77 a barrel

AUDUSD 0.7749 -0.2%
AUDEUR 0.6437 0.4%
AUDGBP 0.5591 0.2%
AUDJPY 82.06 -0.2%
AUDNZD 1.0788 0.2%
GBPAUD 1.7883 -0.2%

NZDUSD 0.7182 -0.4%
NZDEUR 0.5965 0.2%
NZDGBP 0.5182 0.0%
NZDJPY 76.04 -0.4%
NZDAUD 0.9269 -0.2%
NZDCAD 0.9128 -0.2%
GBPNZD 1.9293 0.0%