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Daily Market Commentary

Inflation in the UK has hit its highest level in 16 years, making the Monetary Policy Committee even more concerned as it is well above their targeted rate of 2%.  Pounds are falling however, as the MPC's focus on inflation has the market thinking they are more than willing to allow the economy to slide into recession in order to fight it.  The UK's rates are already highest of the G7, despite their inflation rate being lower than that in the US and the Eurozone.

 It's a heavy day for data. PPI was released this morning, the headline surprising way to the upside, while the core remained in line with expectations.  Expectation were high, however, even in the core at 3.0%

Housing starts continued to decline, printing at 975,000 for May, and April was revised lower to 1,008,000.  The housing market activity continues to decline significantly.

The US current account balance (can we still call it a "balance") was lower than expected at -$176.4 billion, most of this can be placed on more and more expensive oil imports.

 The extent of the selling in the bond market over the last couple of weeks is being shown now.  Despite this mostly bond-bearish news, the market is ticking up strongly.  Lots of central bank talk has prepared the market for these inflation numbers from the US and the UK, and we are not seeing the weakness in the short end and the curve flattening we would expect off of this data.



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