Daily Market Commentary 12th April 2024

The ECB left rates unchanged, as expected, but reinforced the previous narrative, that inflation easing will allow interest rate cuts. The ECB are reading the data and noting that the deep recession currently being suffered by many member nations, is killing the inflation cancer. This is in stark contrast to the US economy, which has never plunged into recession, due to robust monetary and fiscal stimulus. It appears likely, that the ECB will begin to cut rates, before the Fed can see the opportunity. This would add downward pressure to currencies as interest rate differentials widen. US Bond Yields remain bid, while European rates held ground, as the US Dollar remains attractive. US PPI was soft, adding some perspective to the inflation narrative, although core inflation remains high. The EUR fell back to 1.0700, while the GBP trades 1.2550, ahead of key GDP readings.

The shock of the US CPI reading faded, and the commodity currencies settled. The NZD headed back towards 0.6000, while the AUD trades around 0.6550. The Yen has crashed further, to trade above 153.30, which is definitely intervention territory. Inflation remains a factor, despite the debilitating impact of elevated interest rates, on economic growth. The UK has suffered a deep recession, and markets are looking for a positive GDP number tonight, to show there is some light at the end of the tunnel.