In a slow burn reaction to the US Federal Reserve’s upbeat assessment of the economy the US dollar surged in overnight trading. Shares rose around the globe. However industrial commodities continued to send conflicting signals and forex traders appeared to ignore a surge in German inflation that may force the ECB to act.
European and US investors enjoyed gains across the board, with tech shares a feature. The strength and confidence also saw crude oil prices add to recent gains. The counterpoint occurred in metals, where both precious and industrial metals took a trouncing. While a stronger US dollar is partly to blame, the lack of confidence indicated by slumping copper, aluminium and iron ore prices may take the edge off positive moves in Asia Pacific trading.
Perhaps of greater concern is a surge in German inflation. The September read saw a monthly increase of 0.4% for Europe’s largest economy, well above the previous 0.1% and estimates of an in line reading. The annual rate of inflation now stands at 2.3%. Markets are currently pricing a 50% chance of a single rate rise by the end of next year. Any further indications of accelerating European inflation will likely change that assumption, with potentially dire consequences for global asset prices.