Daily Market Commentary 15th April 2022

The ECB left interest rates unchanged, as expected, but committed to ending QE by the end of the Q3. The ECB has no intention to begin the rate raising cycle until QE is over. This is following the reticence of the Federal Reserve and their reluctance to raise rates, in a vulnerable economy experiencing a dramatic  inflationary crises. Surging inflation is already ripping through the European economy, exasperated by the destructive energy crises and supply chain issues, as a direct result of their own suicidal sanctions imposed upon Russia, which are back-firing catastrophically. The ECB will only hope that by leaving record liquidity in place, to stimulate the economy and by leaving interest rates low, it can the afford massive and over-burdensome debt levels. This will not play out well, just as it has not, in the USA. The ECB will miss the boat and an already damaged and struggling economy, will then be hit by a food crises and rising interest rates, almost certainly plunging the zone into a deep recession. The EUR held above 1.0800, but remains extremely vulnerable, while he GBP slipped back below 1.3100.

The Central bank of Korea and Singapore, both joined the party and raised interest rates, in the face of the existential economic threat of inflation. They follow the 50 basis point rises by the RBNZ and Bank of Canada. The RBA have resisted the temptation to act, while their inflation has been modest, but that is changing very quickly. The RBA has been constrained by a reluctance to act during a federal election campaign. Australian Unemployment was steady on 4%, which is a record low levels. The AUD has fallen back to just above 0.7400, while the NZD will struggle o regain 0.6800, as the latest Food Inflation numbers only serve to highlight the inflationary pressures.

Markets will close for an extended Easter break and will come back with a fresh perspective, on the dire straits the Western economies find themselves in, perhaps?