Daily Market Commentary 21st June 2022

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US Markets were closed for a public holiday, allowing an extra day of consideration, following the mayhem of the previous week of trading. Central Bank action, in response to surging global inflation (except Japan it appears?), has dominated the economic narrative. Central Banks have finally heard the call-to-arms, aggressively raising interest rates, chasing the horse down the road. The question now is if it is enough to arrest inflation and if so, how long will it take? If Central banks hold the line, recession is an almost certainty, which would not be politically desirable.

The EUR began the week trading 1.0500, despite the highest rise in PPI in history (33.6%) in Germany, while the GBP trades 1.2230. The ECB and European Council both hold important meeting this coming week, where they will dilly-dally en masse. Inflation will continue to dominate the narrative, while sanctions are hitting home hard. The Western sanctions on Russia have back-fired spectacularly, to the extent that the German Government (in Coalition with the Greens) have decided to re-engage coal fired power plants!

The RBA releases their Minutes today and they are expected to confirm the fears of inflation unleashing on the Australian economy. The new Labor Government will be faced with some very tough times and decisions. The AUD trades around 0.6950, while the NZD may again test 0.6300, on the downside. A quiet start to the week will heat up very quickly, on the markets.

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