Optimism has embraced US equity markets and the big share market rally on Friday was repeated again yesterday. The markets are looking for a ‘bottom’ and searching for bargains, which has driven a sizable recovery in equities, but the macro-economic picture tells a different story. Housing is a leading indicator in the US economy and this has turned sour, as the previous weak data has been confirmed, with the latest statistics. Weekly Mortgage Applications contracted 6.3%, while Existing Home Sales fell 5.4%. This sector is being savaged by massive input price increases and soaring mortgage costs, with little respite foreseeable.
EU Consumer Confidence collapsed, while German PPI predicts massive inflationary pressures will continue. The energy crises is hitting Europe and Germany is at the heart of the problem, with their gas supplies under extreme threat. The EUR drifted back to 1.0150, while the GBP traded 1.1950, following the release of the record 9.4% UK inflation number.
Commodity currencies have bounced on the back of a softer reserve, with the AUD looking to regain 0.6900, while the NZD consolidates above 0.6200. All market attention will now turn to the Central bank monetary policy statements of the ECB and Bank of Japan.