Daily Market Commentary 1st March 2024

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The key US inflation indicator, the PCE, was in line with expectations. This was a great relief to markets, who had feared a renewed spike in inflation, in both the US and Europe. German inflation also continued to fall, down to 2.5%p.a., which was better than expected. The inflation numbers are falling, but warning signs remain, as threats to the supply side are there and constant. GDP numbers in Europe suggest many European nations are in recession, with both Scandinavian Countries, Finland and Sweden, entering technical recessions in Q4. Tough economic conditions have assisted the war on inflation but at a serious cost to business and the consumer. The US Dollar continued to rally, with the EUR falling below 1.0800, while the GBP slipped back to 1.2620.

The Japanese economy has also suffered tough economic conditions, with Industrial Production contracting sharply, as did Housing Starts (which contracted 7.5%). The Bank of Japan has now signalled an end to the ultra-accommodative monetary policy and may head back towards positive interest rates. This was a boost to the Yen, which rallied to 149.50, but remains under long-term pressure. The commodity currencies continue to suffer a harder reserve, with the AUD trading below 0.6500, while the NZD struggles under 0.6100.

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