European markets suffered the fall-out from the Fed monetary policy announcement and equities crashed to close out an extremely negative week. The Fed’s hawkish stance, including bringing forward future rate rises and cutting QE, has triggered some obvious realities. UK Retail Sales contracted 1.4% overnight, while German PPI more than doubled expectations, as economic reality and the costs of fiscal and monetary policies over the last eighteen months finally hit home. The EUR collapsed to trade 1.1875, while the GBP continues a free-fall, plunging to 1.3815.
The Feds sudden ‘come to Jesus moment’ has rang alarm bells. Commodity prices are falling, in the face of the soaring US Dollar, while China unloads commodity reserves to further ease pricing pressures. The Bank of Japan did not follow the Federal Reserve, instead assuring markets QE Infinity would continue, along with their negative interest rate policy. Japan released CPI data, showing the lack of growth and inflation in the economy.
Commodity currencies suffered severely, with the AUD now crashing below 0.7500, while the NZD tumbled to 0.6930. The reality of inflation has dawned on Central Banks and the scale of the problem should not be underestimated.