Non Farm Payrolls missed expectations, to close out a benign week of trading. Ukraine peace negotiations had a constructive base, with the Ukrainians submitting a plan to the Russians, but there is a long way to go. The parallel negotiations and military conflict, is a Russian tactic and ascendancy on the battle front brings advantage on the settlement front. There will be a settlement when the war is all but over and the winner is determined beyond doubt. The sanctions imposed upon the Russians are back-firing on the Europeans particularly. The Russians have planned for this conflict and are completely prepared, while the Europeans have stumbled into this without much of a thought for the consequences. The Europeans were experiencing an energy crises before the war, due to green energy policies and are now at the mercy of fossil fuel providers. The Russians are now dictating that essential gas is paid for in Russian Roubles, which has now returned to pre-war trading levels, plus have fixed their currency to gold. The US Dollar is now under severe pressure, as the worlds only reserve currency. The Russians will escalate and demand essential agriculture, energy, fertilisers and other commodities are also settled in Roubles. This will counter and all but neutralise, the West’s suicidal, economic sanctions.
Inflation has exploded in the US and Europe, with German inflation smashing through 7% and Spain nearing 10%, while the US is suffering 40 year highs. Central Banks are attempting to address the crises with rising interest rates, but it is futile when they continue to print money, in the form of QE. Cost-of-living and spiralling energy costs will result in civilian domestic unrest and this will demand political answers. The EUR has again slumped to 1.1050, while the Yen has resumed it’s descent, falling to 122.50.
Commodity currencies have been allowed a reprieve, with soaring commodity prices, but the market disruptions and supply chain pressures will take a toll. The AUD fell back below 0.7500, while the NZD recovery has been halted, once again testing the 0.6900 level. Local markets may focus on the RBA rate decision, this coming week, but it is unlikely the RBA will make any moves with the Federal Election pending.