Recession fears abound as inflation surges

With all of this week’s monetary policy updates now out of the way, today is a rather quiet end to what has otherwise been, a fraught week in the markets. Whilst we have some Central bank speakers talking today, more clarification is likely next week on the thinking behind some of the Central bank's moves.

This morning's Eurozone inflation data is likely to reinforce the ECB's recent announcement that several interest rate rises are on the horizon. Over the weekend the second round of elections to the French National Assembly will determine how much leeway President Macron has to further his policy agenda. Polls point to his party achieving only a slim majority, at best.?

In the UK, the FTSE fell over 3% yesterday on rising fears of a recession, rampant inflation and an interest rate hike by the Bank of England. After yesterday's 0.25% hike to 1.25% the Bank announced they stand ready to do more if and when needed. Faced with mixed signals from the recent data, the Bank has had to weigh a tight labour market, the cost-of-living crisis and surging energy prices against Government intervention with fiscal stimulus.?With CPI already at 9%, the UK looks set to have the highest inflation in the G7 by 2024, hitting more than 11% by October.

In the US, President Biden said a recession isn't inevitable but that American's are 'really, really down' right now. Today US May industrial production data is forecast to post a solid increase of 0.5%. Several other US economic releases including retail sales and housing starts surprised on the downside this week. markets will continue to monitor the data for further clues as to how far and how fast the FED will continue to go.