Daily Market Commentary 12th May 2023

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The Bank of England raised rates 25 basis points, as expected, citing extremely high food price inflation and rising wages. No mention was made of the fiscal lunacy, or the monetary expansionism that facilitated the fiscal deficit/debt spending. Energy prices have calmed, allowing the crises to subside, at least in the view of the Bank of England. The problem the UK has, is that the reasons for the energy crises, remain. The UK is heavily dependent on imported cheap gas and this was directly and indirectly, imported from Russia. The British sanctions ended this supply and it is never coming back. Food prices are not coming down in a hurry, as the supply chain has to be focused away from the EU, as they are busy shutting down some of the most efficient food producing farms in the world, as global fertilizer prices remain high. UK inflation is around 10%, while European inflation numbers remain stubbornly high, while the US may have peaked? The US Dollar rebounded with the EUR testing 1.0900, while the GBP crashed back to 1.2500, in some ‘buy the rumour, sell the fact’ action.

Commodity currencies suffered the resurgent reserve, with the AUD falling back below 0.6700, while the NZD dropping under 0.6300. Inflation remains stubbornly high and the consequent rise in rates is adding to the hardships for the consumer. This is not likely to end soon, and looming US regional banking crises continues to bubble away.

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