Daily Market Commentary 20th September 2021

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US Equity markets sold off again Friday, amidst concerns over further disruptions from the virus and political/economic reactions to the ongoing pandemic. The unprecedented monetary and fiscal stimulus is being funded by deficit and debt, driving monetary expansion and inflation. Inflation is the only handbrake to Modern Monetary Theory. It is alive and flourishing across Europe and the USA. Attention will turn to Central Banks in the coming week, as it is their monetary policy that has provoked this situation. The FOMC meet this coming week, along with the Bank of England and the Bank of Japan. Weak GDP growth and labour markets are used to justify the monetary largesse, with inflation being labelled as ‘transitory’.

UK Retail Sales missed expectations Friday, which follows the big spike in inflation, now demanding the Bank of England acts to combat the inflationary pressures. The B of E are likely to lead in this action of ‘tapering’ and even indicating a rise in interest rates? The Fed is unlikely to act and continue to falsely label inflation as transitory. The USD rebounded to close the week, with the AUD falling to 0.7270, while the NZD crashed to 0.7030.

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