The huge recovery rally last week on Wall Street, stalled overnight, with markets searching for direction. The G7 met in Germany, while NATO meets in Spain, to gather and co-ordinate the path forward. NATO has committed to a massive build-up in military resources, to defend against the aggression from the East, also considering the increased membership, to include Finland and Sweden. The G7 met in Germany, also in support of NATO, the member and Non-Member States. Western leaders are building on the success of their economic sanctions imposed upon Russia, with further political and fiscal support for the Ukraine. The success of the sanctions may now also be extended to include secondary non-participatory countries, not already committed to sanctions. The stage does not get much bigger than NATO and G7, for which these most impressive group of Western leaders, will continue to forge a plan towards victory!
The strong rebound in global equities in the previous weeks trade will be tested, as economic data reflects the current environment. Spanish PPI came in at 43.6%, confirming the inflationary pressures coming down the turn-pike. Central Banks have re-affirmed their commitment to defeating runaway inflation through raising interest rates, but the fiscal QE, exposes the ineffectiveness of this policy. The EUR traded up to 1.0580, while the Yen trades near 20 year lows, at 135.50. The Bank of Japan has a mission to control and support the Government Debt markets, enabling the historical low interest rate environment to continue, supported by low inflation, to date?
Commodity currencies drifted in the new week, with the NZD falling back below 0.6300, while the AUD clung to 0.6900. Local markets remain quiet and look to international data leads.