Equity markets turned sour overnight, following strong recent gains, as markets look to consider the inflationary consequences across Europe and the US. The Fed look likely to raise rates by 50 basis points, in their attack on their own rampant inflation, while the ECB remains inactive. EU CPI inflation came in a 7.4%, which is a huge spike and is reflected across most EU member states. The ECB has chosen to defer action to combat spiralling inflation, to their own detriment and the pain of cost-of-living for their citizens. US 10 year bond yields resumed their upward surge overnight , popping up to 2.95%, which should ring major alarm bells. The EUR held 1.0840, despite the surging inflation data, while the GBP hit 1.3030.
Commodity currencies suffered a setback following the resurgent reserve. The AUD crashed back to 0.7370, while the NZD lost major ground and now looks se to test 0.6700. NZ Inflation was the dominant factor in domestic trade, surging to 6.9%, up a full percentage from the previous 5.9%. This comes despite the RBNZ looking to get ahead of this inflation freight train, well before other major Central Banks. The warning signs have been there for some time, but have not been heeded. The attempt to brush the rampant inflation off on a foreign war is insane. This has the usual origins and culprits, in the form of fiscal and monetary largesse by Government and the Central Bank, with debt monitisation.
Market realisation of the devastating impact of inflation and surging interest rates, is coming, as is a deep recession across the world.