Daily Market Commentary 16th February 2023

US Retail Sales jumped 3% for January, beating expectations and following closely on a hotter than expected US inflation reading. The stronger than expected retail sales number is a reflection of the strong labour market and perhaps a flow on from inflation. Economic conditions appear to be holding out well in the US, which only serves to encourage the Fed to hold the line on interest rate rises, to overwhelm inflation. US Bond Yields continue to rise, as do European yields, confirming markets are starting to realise Central bank monetary policy will continue to tighten. The rising US yields are boosting the Dollar, with the EUR falling to 1.0650, while the GBP is testing the downside of 1.2000.

The RBA Governor confirmed further rate rises to come, when appearing before a Senate Committee, warning of the dangers of elevated inflation in the economy. This did little to reverse losses in the currency, which is being battered by the rising reserve. The AUD crashed back below 0.6900, while the NZD plummeted to 0.6260, suffering the effects of the extensive and damaging cyclone. The NZ economy can ill afford this damaging weather event and an earthquake showed ‘Mother Nature’ was not yet finished. Markets will focus on local Australian unemployment numbers, while PPI/inflation data out of Europe and the USA, will continue to drive the global narrative.