Daily Market Commentary 1st March 2021

US Equities continued the rout for the week, with a bit of panic creeping in, as interest rates spike. The US 10 year has gained 50 basis points this year, which has stolen the narrative in markets. On Friday the 10 year yield fell from 1.6% to 1.4%, but this did little to support market confidence, as share markets crashed significantly, for the week and the US Dollar surged. The EUR fell to 1.2070, while the GBP crashed below 1.4000, as safe haven trades bolster the higher interest rate support.

The trade exposed commodity currencies continued to suffer a serious bashing, with the AUD falling all the way back to 0.7700 (from the week high of 0.8000!), while the NZD retreated to trade 0.7225. There are significant challenges facing markets and further upward pressure on interest rates, may drive some panic and the US Dollar higher. Modern Monetary Policy alleged neutrality of interest rates, despite the massive expansion of the money supply? Perhaps not.

The coming week will focus on Central Banks and the RBA has a meeting scheduled Tuesday, to decide policy. Growth and Manufacturing will be key to economic data releases and the US will be watching employment data, culminating in the Non Farm Payrolls number Friday. Markets are very nervous and with good reason.