Positive signs are emerging from he Ukraine/Russia Peace negotiations and this gave markets some renewed confidence. US Retail Sales missed expectations, coming in at 0.3%, for the month. Inflation remains the key concern and this now a global problem. Central Banks must address the inflation crises as the Ukraine war only aggravates the situation, with supply issues on energy and agriculture. The Fed raised rates by 25 basis points, in line with expectations, and indicated 7 or eight more rises expected in 2022, with more to come in 2023/24. The yield curve is flattening, which is not a good sign, but we have now entered a new interest rate cycle. The Fed have finally recognised the inflation crises, but must now end QE immediately and contract the balance sheet, to have any hope of gaining a grip on the situation. The rising interest rate environments boosted the US Dollar and the EUR slipped to 1.0970, while the Yen has crashed to 118.70.
Commodity currencies suffered from the rising reserve and retreated from intra-day highs, with the AUD slipping back to 0.7220, while the NZD drifted below 0.6800. The record inflation in the US, coming in at a 40 year high of 7.9%, while the PPI hit an all time high of 10%. This will feed through to inflation directly and the Ukraine will only incite the crises. Commodity prices continue to correct, after the massive spikes from the war in the Ukraine, which will remain volatile.
Markets now digest the FOMC decision and how this will impact, while keeping a close eye on the Ukraine.