Daily Market Commentary 31st January 2022

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The week of market volatility continued into the close, with European bourses closing sharply lower, while US markets rallied strongly into the close. On the one hand the current blows massive injections of liquidity, which funds the asset bubbles, while red and amber lights are flashing across global market. US equities remain in correction territory, following the forced reality that has been imposed upon the Federal Reserve, in the form of inflation. The Fed has finally recognised the inflation crises is upon them, as political pressure flows through to the Central Bank. Inflation is the cruellest of all taxes, as it hits everyone, but proportionately hits the lower income and compensates the asset owners.

The FOMC meeting confirmed that there will be interest rates rises in 2022, with the market now speculating five such rate rises, while the reluctant Fed delays the elimination of QE. The Fed continues to pour petrol on the inflation dumpster fire, by massive injections of liquidity into markets, in the form of QE, when they should be contracting the size of the enormously bloated balance sheet. The coming week has an avalanche of economic data releases, with inflation and growth, being central to market perceptions, while the Bank of England and ECB both meet to decide on monetary policy. The Bank of England may be a lot more reactive than the ECB, which has limited inflation despite massive PPI, because of the dismal growth in the European economies. The Fed has forecast interest rate rises, which has fuelled bond yields and the US Dollar. The EUR has crashed to 1.1140, while the GBP has fallen to 1.3360, despite the re-opening of the economy.

Commodity currencies continue to fall victim to the rising reserve currency, with the AUD collapsing below the BIG, BIG figure of 0.7000, while the NZD crashed to 0.6530. Economic data releases in Australia and NZ defy reality, with Unemployment numbers hitting record lows, while in reality the opposite is true. The economies and businesses have been devastated by the Government regulation over COVID and unemployment is being disguised through magical re-categorisations. The unemployment measures are no longer a true measure of the labour markets, as inflation is completely underestimated by new measure and exclusions.

The coming week will focus on brave growth and inflation forecasts, while the Bank of England and ECB may have to face reality?

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