Global equities bounced higher, while the mighty US Dollar plunged lower, in volatile overnight trading on markets. The US Dollar has been driven higher by the inflation fears and the surging US Bond Yields. US 10 year Bond yields blew through 2.9%, but hit the wall overnight and suffered a sharp retreat, falling back to 2.82%. This allowed the GBP to regain 1.3050, while the EUR rebounded to 1.0840, following stronger than expected Industrial Production numbers.
The looming economic recession in the EU, has been brought about by spiralling inflationary pressures, triggered by an energy and building food crises. These inflationary pressures will directly translate into weaker disposable incomes and demand. German PPI was a shocking 30.9% annualised rate, which will directly translate into inflation and CPI. Equity markets shook these prospects off overnight and booked gains, following a strong rebound rally, supported by stronger than expected corporate earnings.
Commodity currencies were beneficiaries of a faltering reserve, with he NZD looking to regain 0.6800, while the AUD surged back through 0.7400. EU New Car Sales contracted 20.5%, while energy costs surge and input costs spiral upwards, so it is hard to remain confident about the positive near term economic future in Europe or the UK.