Daily Market Commentary 1st March 2023

French and Spanish inflation came out hotter than expected, moving against market expectations and confirming the inflation crises is far from over. The ECB have already indicated they will raise interest rates by 50 basis points, at their next meeting, but they remain way behind the yield curve. European Bond yields are moving steadily higher, as are US Bond yields, which is throwing uncertainty into equity and currency markets. US economic data is also remaining substantially negative, lead by the housing sector, with Pending Homes Sales crashing and home prices also beginning to fall. The Dallas Fed Manufacturing Index is sharply lower, as is the Richmond Fed Manufacturing Index, pointing to a distinctly weaker manufacturing sector. The EUR pushed back above 1.0600, while the GBP has rebounded to 1.2100, following an updated trade deal between the UK and the EU.

The flagging reserve allowed the commodity currencies to regain some ground, with the AUD looking to regain 0.6750, while the NZD heads back towards 0.6200. NZ Business Confidence remains in the doldrums, with the index remaining heavily negative, but present conditions in NZ are no assist. Australian Retail Sales jumped to higher than expected levels, but conditions remain tough in the extreme, inflationary environment.