Daily Market Commentary 1st November 2022

EU inflation blew through previous highs, hitting 10.7% for October, while GDP growth numbers crashed, but remained in the black. The technical recession has been avoided, but the economic storm clouds are gathering, as inflation ravages Europe. The energy crises continues, as the weather turns cold, heading into the Northern Winter. US equities turned negative but it has been a huge month of gains, with the Dow looking to book massive increases this month, not seen since 1976! The rally in equities has been based on ‘peak-inflation’ and the perception that the Fed will move to pause their aggressive rate hikes. The Fed is likely to raise rates by 75 basis points this week, so all eyes will be on the narrative and signs of a pause? The EUR slipped back below 0.9900, despite the ECB raising rates by 75 basis points in their last meeting, while the GBP fell to 1.1470.

The RBA ‘Melbourne Cup Day’ meeting will likely raise rates, it is only a question of ‘by how much’? Only the insiders will be watching, as the ‘Race that stops the nation’, does just that. The RBA surprised markets by raising rates only 25 basis points, at their last meeting, only to be shocked by the inflation numbers that followed. Inflation blew through expectations, so perhaps the RBA will react to clean up, or bravely hold the dovish stance? The AUD trades below 0.6400, ahead of the key Central Bank meeting, while the NZD struggles to hold on to 0.5800.

All eyes turn to Flemington, with a few awaiting the RBA decision.