Daily Market Commentary 18th June 2022

The Bank of Japan remains the odd-one-out, amongst major Central Banks, maintaining record low rates and increasing the QE purchases of Government Bonds. Japan appears to be the only major economy not suffering the plague of rampant inflation, which allows the expansive monetary policy to continue. The Yen is trading around a 24 year low and it was thought the BoJ would address this, but no. EU inflation surged to new record levels, soaring to 8.1%, while the ECB fiddles with monetary policy around asset re-purchases. Surging bond yields have prevented the ECB from raising rates and cutting QE, as debt servicing moves into danger areas. Debt levels have not been addressed by the EU/ECB, as the temporary spikes around the GFC have become permanent and risen to extremely dangerous levels. The ECB is a tinder-box, ready to go up, with ECB inaction and inflation ripping the member States economies apart. The EUR retreated back below 1.0500, while the GBP crashed back to 1.2200.

The coming week will continue to focus on inflation and Central bank activity. The ECB and European Commission are due to meet this coming week, but they are operating between a rock and a hard place. Continued inaction, which is a feature of European politics, can be expected. The AUD crashed back to 0.6900, suffering a rally in the reserve, while the NZD fell below 0.6300.