Daily Alert – Tuesday 19th April 2022: Central banks concerned about inflation expectations

Mark NugentApril 2022, Daily Alert

Daily Alert – Tuesday 19th April 2022: Central banks concerned about inflation expectations

Good morning.

Last week was all about central banks and their concerns about inflation expectations. Why do they care? Well, if the people think prices are going up, they ask for higher wages and employers increase their prices to cover this and voila, there you have it, a wage/price spiral created out of thin air and the mere expectation of inflation. Central banks hate this because it seriously compromises their ability to hit their mandated inflation targets. All three central banks last week alluded to this and are ready to hike rates if they feel inflation expectations are becoming entrenched.

My one trade, Japan225 went nowhere, and I closed it on Thursday night at breakeven. There will be a video in due course.

This week only really gets started today. Equities are going nowhere but the US 10-year yield is rising, and the JPY is falling. It feels a bit risk-off, but equities have yet to reflect this. Early this morning we had the Reserve Bank of Australia meeting minutes. They referred to a “pickup in wages growth” which is a sign of the dreaded wage/price spiral.

As always, I go through my trading focus for the week in the video.

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