Daily Market Commentary 10th June 2022

The ECB failed to see any urgency in the current economic crises, reiterating the current monetary policy program, with negative interest rates. The EU has suffered record inflation (8.1% May) and much of this is due to the record negative interest rates and massive fiscal deficit funding. The ECB recognised this with huge economic headline reviews of inflation (upwards) and growth (downwards) for the coming years. It did not shock itself enough to act though? The ECB indicated a miniscule 25 basis point rise in July and perhaps 50 basis points in September. The argument has been that QE must be removed before interest rates are raised. This may have some validity, but the serious crises the ECB is suffering, needs immediate action! Indecision is not a virtue in times of crises. The EUR fell to 1.0600, while the Yen collapsed to 134.50, as the US Dollar surged.

The ECB revised GDP growth sharply lower, but even these drifts into reality remain heroic, as the crises has already pushed the zone into recession that only needs technical confirmation. Inflation is destroying citizens cost-of-living and people are experiencing this in real-time, while prices are soaring, supply-chain problems escalate . The EU sanctions are driving the energy and food crises, which will only hasten the Eurozone into a dark economic place. Weekly Jobless Claims in the US jumped, as did the reserve currency, with risk appetite plunging.

The AUD tumbled to below 0.7100, in the face of the surging reserve, while the NZD collapsed below 0.6400. All market focus will be directed towards the US inflation number out tonight. Expectations are for a softening in the pressure and to dip from record highs. If this is true and substantial, then markets may find some temporary relief. The reality is that inflation is running rampant and is causing devastation to peoples lives and the economy overall.