The US GDP growth data was in line with expectations, coming in at 28%, while the PCE inflation indicator jumped higher. The GDP number is enhanced by massive fiscal spending, deficit and debt, which is likely to change in the next few months. The preferred inflation indicator of the Federal Reserve is the PCE, and that jumped sharply higher. Inflation in the US economy has never been conquered and the Fed’s reticence with interest rate cuts, confirms this. The US Dollar fell sharply, with the EUR bouncing back to 1.0600, while the GBP shot back up toward 1.2700.
The RBNZ cut rates by 50 basis points, but the NZD jumped sharply higher, aided by a weaker reserve. The NZD jumped back to 0.5900, while the AUD regained 0.6500. The Australian inflation data confirmed the battle is being won, with inflation dipping to 2.1%, annualised. The RBA is waiting for consecutive reading lower before they will act on rates.
