Equity markets turned South overnight, following the release of the Fed Minutes and more US Tariffs promised. The Fed minutes revealed members were very keen to leave rates ‘higher for longer’, noting inflation was stubbornly high and the threat of further tariffs, would impact trade and growth. The Fed is headed for a confrontation with the Trump administration, as he has called for lower rates in the US, and across the world. The previous Trump administration suffered the Fed’s high interest rates in his last term, and he will resist a repeat. The Fed is independent, but Trump has tools, including auditing the Federal Reserve, which has never been done before. An audit would no doubt have massive repercussions and revelations, not only to the Fed, but the whole economy and the global monetary system. The US Dollar was softer, with the EUR breaking back above 1.0450, while the GBP looked to regain 1.2650.The weaker reserve allowed a surge in commodity currencies, with the AUD approaching 0.6400, while the NZD consolidated above 0.5700. Australian employment data was flat, with the headline rate moving up slightly to 4.1%, despite relatively strong job growth. Local markets will be watching PMI data out of Australia and NZ trade results. Japanese inflation numbers will also be released today, and are expected to reveal upward pressure, pushing the Bank of Japan to raise rates further.
