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Global market watch - 15th September 2021

The pound was supported after the release of generally positive employment data. The unemployment rate dropped to 4.6% and average earnings were as expected. This helped to encourage sterling buyers before the US CPI data release. Buyers were encouraged again as weaker than expected US CPI was released. The government pushed back the date to impose checks on EU goods until the middle of 2022 in an attempt to minimise supply chain issues. In particular, customs declarations and controls will now be introduced on January 1 2022 and safety and security declarations will not be introduced until July 1 2022. We have just had UK CPI released at an estimate beating 3.2%. This has encouraged some sterling buyers in early trading on the expectation  that as this is the highest reading since March 2012 it will put pressure on the Bank of England to tighten monetary policy. 

Early yesterday ECB’s Villeroy maintained that the latest inflation rise is temporary and Bundesbank President Weidmann spoke on digital currencies rather than EU inflation so the market was relatively calm. The weaker than expected US CPI data only produced a brief period of strength for EURUSD.
The US Dollar was a little soft before the important release of US CPI. It seems that Fed Chair Powell has a correct understanding of US inflation at the moment as US CPI was released slightly lower than expected, only rising by 0.3% rather than the 0.4% expected. This encouraged US Dollar weakness first off but it was short-lived and the dollar regained its footing after the US equity markets slipped again.
The AUD was given a leg up by the weak US CPI data.

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