Daily Market Commentary 20th January 2023

European equities took some profit overnight, celebrating gains for the new year, but US markets finally broke the positive sentiment. US Retail Sales and Industrial and Manufacturing data was heavily negative and talk of recession is returning. Inflation is heading in the right direction, but remains stubbornly high, as do energy prices, thus casting a negative economic pall. US Building Permits contracted 1.6%, while Housing Starts fell 1.4%, amidst a gloomy housing sector. The US Beige Book report was flat, with little good news, while the Fed remains hawkish. The USD was steady, with the EUR trading around 1.0800, while the GBP traded up around 1.2350.

The NZ ‘PM of Aotearoa’ resigned yesterday, which had little impact on the currency, as this will have little impact on the NZ economy. The economic direction will not alter, in the short term, as Adern will remain in office until February and her Government is unlikely to change their economic direction, under a new leader. Australian Unemployment was steady, while inflation expectations are on the rise, as is Food Inflation in NZ. The prospects of recession in Europe and the US is not good for commodity currencies and the AUD fell back to 0.6900, while the NZD dropped below 0.6400. Markets will digest data and look closely at inflation ad growth numbers to close out a negative week.