The international leaders roadshow continued overnight, with many of the G7 leaders represented at the NATO conference, in Spain. NATO has already agreed to massively increase their military preparedness and also strengthen their membership, by adding Finland and Sweden. This is a massive boost to the NATO family and reaffirms solidarity. The ECB is hosting a forum of Central banks in Sintra (Portugal), discussing monetary policy and the strategic plan for global Central Banks. The Fed Chairman Powell recognised the risk of steep interest rate rises, but confirmed the risk of inflation was greater and outweighed recessionary concerns. This was a boon to the US Dollar and the EUR dropped to 1.0440, while the Yen crashed to 137.00! The Japanese policy of ‘all-in’ in terms of QE and monetary expansionism is an existential gamble and relies heavily on inflation being transitional.
Spanish Inflation broke into double figures, with the CPI hitting 10.2%, a near 40 year high. The news was not earth shattering and was tempered by inflation data out of Germany, which showed preliminary inflation data softening. This would be a huge trend-relief for the ECB, as they have only jaw-boned any remedial measures to attack inflation, to date. Actual PPI and CPI data tells another story and citizens are certainly feeling the runaway inflation in their pockets.
The rally in the reserve pushed the AUD back towards 0.6850, while the NZD plunged towards 0.6200. Australian Retail Sales were better than expected, while NZ Business Confidence numbers (released this morning), may impact local markets. A close look at the Feds favourite measure of inflation, the PCE, will be the focus of markets later tonight.