European and US equity markets turned sour again overnight, ahead of the ECB meeting tonight and key CPI data released in the US, tomorrow. The ECB remain the only major Central Bank to leave QE in place and interest rates at record lows, ignoring the rampant inflation ripping through European economies. The ECB have indicated that they will remove QE, as a pre-requisite, before raising interest rates in July. The ECB face major funding issues for member Countries, while any pressure on interest rates, will only add to debt service ability. The EUR has slipped below 1.0700, while the GBP has fallen back to 1.2530, amidst the British political turmoil. BOJO survived the vote of confidence from his own party and now appears to be mortally wounded, a ‘dead man walking’. The PM has squandered a massive majority in the UK Parliament, following the post-Brexit election, focusing on green energy policies and the Ukraine war. The standard of living of UK citizens has collapsed, due to inflation and the energy and food crises, due to green energy polices, fiscal deficit/debt spending and Russian sanctions. The only reason he has survived this long, is the lack of alternative options, which does not bode well for the future.
Markets in the US are focused on inflation, with the CPI expected to soften, when the number is released tomorrow. Markets and the Fed are hoping that inflation has peaked, but the causes remain, with massive fiscal deficit spending in the US and across Western economies, while the Ukraine war continues to drive high energy and food prices. US 10 Year Bonds rose back above 3%, driving the US Dollar higher. This dampened enthusiasm for the AUD, while fell back below 0.7200, while the NZD dropped below 0.6450. GDP data becomes a key focus, as warnings of recession become louder, as the Japanese GDP contracting for Q1.
All attention will be on the ECB, US CPI and the University of Michigan Economic Sentiment report.