The Bank of England blinked overnight and missed the opportunity to alter their course on monetary policy. The surge in inflation has lead for many to speculate that the Bank of England would be the first major Central Bank that would abolish QE and begin to raise interest rates. The Bank missed the opportunity and elected to maintain the status quo, thus giving inflation free rein, in the middle of an energy crises. The GBP crashed below 1.3500, while the EUR held 1.1540, despite some economic warning signals. New Car registrations in both Germany and the UK have collapsed, due to supply chain issues, surrounding chip availability. EU PPI has exploded, jumping to an extraordinary 16%, which will directly translate into inflation. High inflation and low growth equals ‘stagflation’ in the Eurozone.
The rising reserve pushed commodity currencies lower, with the AUD falling below 0.7400, while the NZD tests the downside of 0.7100. All markets are now focused on tonight’s Non-Farm Payroll number, which is expected to be around 500,000 jobs added to the US economy. Last month was a massive miss and any continuation, will have dramatic consequences across markets.