Daily Market Commentary 1st October 2021

US equity markets fell again overnight, cementing a dreadful month on share markets, globally. Markets have been concerned about inflation and the impact on Central Bank monetary policy and the new crises of the US Debt Ceiling and the US Budget. Central Bankers have attempted to disguise inflation as temporary and transitory, blaming supply chain issues, which will miraculously come right and inflation will disappear. This fairy does not even have a wand to wave. Inflation is building and will not be eliminated overnight. The supply chain issues may contribute to inflation but the underlying cause is the deficit/debt, caused by fiscal and monetary policy.

US Bond Yields have reflected the inflationary markets, supporting a surging US Dollar. The EUR continued to decline, crashing below 1.1600, while the GBP stage a recovery, bouncing to 1.3470. The UK GDP number was better than expected,  coming in at 5.5% for Q2, or 23.6% annualised. The UK economy is reopening and growth is there, but inflation will force the Bank of England to act, breaking free of the global unity policy.

The commodity currencies stabilised with the weaker reserve, allowing the AUD to break back above 0.7200, while the NZD still struggles below 0.6900. NZ Business Confidence was weak again, while Australian Building Permits surged. Lock-downs are destroying both economies, while commodity demand is on the wane, as China and other Asian economies struggle.