Daily Market Commentary 20th October 2022

UK inflation surged back to record highs, hitting 10.1%, beating expectations. EU inflation also surged towards 10%, as all of Europe suffers spiralling and out of control inflationary pressures, initially triggered by massive fiscal deficit spending, but accelerated by the destructive energy crises. The Bank of England were forced to reverse the QT program and enter into an emergency bond buying program to stabilise Gilt Bonds, following the disastrous political mini-budget. The Bank of England have now estimated it could take up to 10 years to reduce the massive balance sheet expansion, with bond holdings valued GBP 838 Billion! The turmoil in UK markets have been temporarily stabilised, but the political scene is in disarray, following the resignation of another senior Cabinet Minister.

The GBP fell back below 1.1200, while the Yen has crashed towards 150.00, inviting emergency intervention from the Bank of Japan. It is easy to see where all of the selling is going, with US capital inflows surging at atmospheric levels. The Fed’s Beige book confirmed moderate growth, but warned of huge threats from inflation, rising interest rates and extended supply chain constraints. US equities took a breather from the recent resurgence, following negative housing data and rising Bond Yields.

Commodity currencies are suffering the strong reserve, with the AUD falling to 06250, while the NZD drifted to 0.5650. Inflation and growth remain the market narrative.