Daily Market Commentary 17th February 2021

European equity markets trade around record highs, boosted by positive economic growth reports. The much anticipated recession, looks to have been avoided, in many European countries, dodging a bullet by the slimmest of technical margins. Energy prices remain key to the European Union’s economy and the driver of inflation, which remains the biggest threat to Europe. US inflation was hotter than expected, with the latest PPI number coming in higher than expected, which follows a hotter than expected CPI number, earlier in the week. Inflation remains the biggest problem in the US economy and the Federal Reserve remains committed to winning this war. Bond yields remain bid, boosting the US Dollar, driving the EUR back to 1.0650.

The stronger reserve continues to impact the commodity currencies, with the AUD falling below 0.6850, while the NZD plunged under 0.6250. The impact of the RBA’s actions taken to combat inflation is beginning to impact the labour market. Australian unemployment rose from 3.5% to 3.7%, with a sharp fall in full-time jobs. The RBA must commit to their tighter monetary policy, to get ahead of spiralling inflation and these are the consequences of rising rates.