The intervention into the UK Bond Market triggered a broad rally in yields, equities and non-reserve currencies. The Bank of England reversal of QT (back to QE), in an effort to combat the reckless unfunded UK Government’s fiscal spendathon mini-budget, kept bond yields lower but is a finger in the dyke. This will only lead to higher inflation and reverses the ant-inflation measures that had been employed for the last six months. The Bank of England will be forced to fund the fiscal excesses, thus facilitating another inflation explosion and the expanding the cost-of-living crises. US Bond Yields also drifted lower, but the US Dollar rebounded, with the EUR falling back below 0.9700, while the GBP dipped below 1.0800.
Inflation remains the big problem haunting Central banks across the Western world and these banks need to continue rate rises and heavy reductions in liquidity to win the war. German CPI reached double figures, while EU inflation data is expected to confirm a number fast approaching 10%. US PCE will be released tonight and this will be a big market indicator. US Q2 GDP contracted 0.6%, confirming the US ‘technical recession’, despite the semantics. The resurgent reserve pushed the commodity currencies lower once again, with the AUD crashing back to 0.6450, while the NZD plunged to 0.5650.
Energy remains at the heart of the inflation crises and the sabotage of the Nordstream pipelines will only exasperate this and add to the de-industrialisation of Germany.