Daily Market Commentary 10th April 2023

Markets closed for the long Easter break flat, without the release of the all-important Non-Farm Payroll number , due for release Good Friday. All signs point to a softer labour market, with the Jolts , ADP and Challenger reports all showing signs of a weaker labour market. This is what the Fed has been working towards and may allow them to hit the pause button for interest rate rises, in the current cycle. There is a definite split in Western Central Banks, with the RBNZ following the lead of the Fed and the ECB, who all see continued high inflation, while he RBA has chosen to hit the pause button early (along with the Reserve Bank of India). Time will tell if the RBA has been premature in their actions. The energy crises is far from over and the huge OPEC+ cuts to global oil production, will impact energy prices and flow directly through into inflation. The US Dollar was softer, allowing the EUR to break back above 1.0900, while the GBP traded around 1.2450.

The RBA released the bi-annual Financial Stability review and gave sombre warnings of the high level risks in the markets , in particular the banking sector. Perhaps this pessimistic view contributed to the pause in interest rate hikes, but a more likely cause, was the impact on mortgages and the impact on the deeply indebted housing market in Australia. Central Banks are becoming more dovish, apart from the RBNZ, which must be staring at some extremely ugly inflation data internally? The short week for Easter, is extended to the following short week of trading. The Non-Farm Payroll number will be digested over the Easter break and hit thin markets Tuesday morning. The focus will then shift to inflation, for the coming week. Commodity currencies were softer, to close out the week, with the AUD falling to 0.6650 and the NZD dropping below 0.6250. Most of the gains from the surprise RBNZ 50 basis point rise, have evaporated, overwhelming expanding interest rate differentials and sending warning signals.