Daily Market Commentary 1st September 2023

August was a tough month for equities, although much of the heavy losses suffered earlier in the month, were mitigated with a rally in the last week or so. Inflation and interest rates continue to dominate the market narrative, with inflation remaining stubbornly high, in both Europe and the USA. EU inflation falls ceased, with rises in some member States, including France and Austria. EU inflation remained around 5.3%, troubling the ECB, and probably ensuring further rate rises are on there way. In the US, the PCE inflation indicator, which is the preferred measure of the Fed, held around 3.3%, with Core inflation actually rising to 4.2%. inflation remains a big issue and a softer labour market would go a long way to easing this problem. The Jolts Jobs report and the ADP Jobs report, were both signalling a softer labour market, while the Challenger report did the same. The Challenger Jobs report, showed a sharp rise in job cuts, which all bodes well for tonight’s Non-Farm Payrolls number. The EUR traded around 1.0850, while the GBP drifted back, to trade above 1.2650.

The bounce in the reserve currency halted recent gains in commodity currencies, with the AUD trading around 0.6450, while the NZD slipped back below 0.5950. Markets now await the all-important Non-Farm Payrolls number, which is expected to be softer, so any major surprises may heat up markets to open the new September trading month?