Inflation once again is the focus on European markets, with the UK posting a massive blowout, headline CPI spiking to back to 3%. UK inflation surged to 3%, from 2.5%, while Core inflation exploded to 3.7%. This is a serious concern, considering the UK economy suffers under deep recessionary conditions. This puts the Bank of England into a box. They cannot ease monetary conditions, as inflation will continue to spiral out of control, but they cannot raise rates as the economy is already in bad condition. The British economy is beset with terrible fiscal management, with rising deficit/debt spending, and no plan to remedy the dire situation. Elsewhere Trump has proposed 25% tariffs on Auto, Pharmaceuticals and Semi-conductors. This would be a major shock to markets, and more especially Taiwan and Asia. It appears Trump intends to completely realign current trade partners, while focusing back on domestic investment and production. The EUR drifted back to 1.0400, while the GBP slipped back below 1.2600, once again.The RBNZ cut a further 50 basis points, in line with market projections, back to 3.75%. This means the RBNZ has but 175 basis points in the last six months! This is huge and reflects on the Central Bank’s poor handling of monetary policy, prior to the easing began, while the recessionary economic conditions demand monetary stimulus. The RBNZ cited the risks to trade from tariffs, that could lead to further weakening of economic activity. The RBA has joined the RBNZ, in their mad dash to stimulate the flagging Australasian economies, as political pressure mounts. The NZD softened, but remain remarkably bid, holding above 0.5700, while the AUD drifted to 0.6350.
