Daily Market Commentary 10th September 2021

The ECB left rates unchanged and advised any tapering would not commence until inflation numbers broke above the upper target level of 2%! The ECB interest rates are at or under 0%, which is maintained through debt monitisation, as there is no demand for debt in the markets, at these levels. The QE program of asset purchases will remain in place, while the emergency PEPP program may taper, but this is a secondary emergency monetary liquidity program. The problem is that the EU CPI number has surged to 3%? This is explained away as ‘transitory’ and a supply chain issue, that will be ironed out in due course. Global Central Banks are playing with fire and modern monetary theory is a time bomb, waiting to explode in the markets. The EUR was unaffected by the vanilla ECB statement, trading 1.1830, while the GBP was boosted by hawkish BoE Governor Baily. Baily appeared before the a Parliamentary hearing and testified that economic condition now have improved to a level that he is considering interest rate hikes, which pushed the GBP up to 1.3845.

Chinese inflation numbers were lower than expected and commodity currencies remain flat. Surging supply chain issues and costs remain a big threat, while commodity prices are coming off recent highs. The AUD has fallen back to 0.7350, while the NZD fights to hold 0.7100, awaiting Credit Card Spending numbers in todays trade.

Locked down economies spell economic devastation.