American inflation tips Australian dollar over

DXY blasted off last night and mowed everything down:

The Australian dollar was hammered:

Gold rose with American inflation, Oil was thumped:

Base metals were soft:

Big miners are in free fall:

EM stocks were hit:

Junk is screaming a new warning for risk:

As yields jackknifed anew and the curve was pounded:

Which sank stocks, led by Growth:

Westpac has the data:

Event Wrap

US CPI inflation in October was stronger than expected, at 0.9% m/m and 6.2% y/y – the fastest annual pace since 1990 (est. 0.6% m/m, 5.9% y/y). The ex-food and energy core measure also beat expectations, at 0.6% m/m and 4.6% y/y (est. 0.4% m/m, 4.3% y/y). The gains were led by an expected surge in energy prices, but there were additional large gains for new and used cars, tobacco, medical care, and food. Supply chain disruptions are continuing to lift prices, and there are few signs that energy price pressures are abating.

Event Outlook

Aus: Balancing the start of NSW’s recovery against the last stage of Vic’s lockdown, Westpac anticipates employment to fall by 50k in October (market median is +50k), with risks to the upside. A further decline in participation should limit the rise in the unemployment rate to just 0.1ppt (Westpac f/c: 4.7%). November MI inflation expectations will also provide timely insight into consumer views on inflation pressures.

NZ: Food prices in October should reflect a seasonal drop in vegetable prices (Westpac f/c: -0.8%). The November ANZ business confidence survey will meanwhile reveal how businesses are dealing with rising costs and downside profit risks despite firm demand.

UK: Fuel shortages, supply issues and ongoing delta risks are likely to materially slow GDP growth in Q3 (market f/c: 1.5%). The September trade balance should reflect the UK’s tough trade environment due to Brexit.

US: Veterans Day; bond markets closed; equities open.

American inflation was hard to ignore. Here’s more detail:

On a year-over-year basis, the median CPI rose 3.1%, the trimmed-mean CPI rose 4.1%, and the CPI less food and energy rose 4.6%. Core PCE is for September and increased 3.6% year-over-year.

Both flighty and sticky inflation were hot on the month:

And year on year:

There is still loads of imminent supply chain deflation embedded in these numbers but while we wait for that there other rising sticky measures such as rent to spook markets. The implications are obvious:

Multiple rate hikes in 2022. Which is a roaring gale building behind DXY.

We are building swiftly towards a clash of economic fire and ice that threatens risk assets including the AUD.