Daily Market Commentary 1st September 2021

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Inflation become the topic du jour in Europe again overnight, with both French and EU inflation numbers, pointing to a growing problem. The EU CPI spiked to 3%, well above the ECB target of 2%, despite the lack of growth in the zone. French CPI was also up, but the real worry is the surging PPI, which hit 8.7% in France, which means input costs are rising sharply and will flow through to cost of living. The EUR rallied to 1.1800, encouraged by the prospects of tightening monetary conditions and a weaker USD, while the GBP traded 1.3750.

Chinese PMI data was weaker than expected, while Japanese Industrial Production contracted 1.5%, reflecting softer economic conditions in Asia. Australian Building Permits contracted 8.6%, as data begins to reflect the devastating lock-downs across Australia, while NZ Business Confidence contracted sharply (14.2%). The various states of lockdown across NZ and Australia are beginning to be reflected in the economic data, but the devastation wreaked upon business, will be far worse and more consequential. The softer reserve allowed the NZD burst through 0.7000, while the AUD broke through 0.7300.

Australian GDP numbers may influence local markets, as global markets look at the signal of the ADP Jobs report, for a indicator to the Non Farm Payrolls later in the week.

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