Daily Market Commentary 22nd March 2024

The Fed left rates unchanged and confirmed that there will probably be at least three interest rate cuts this calendar year. The conquest of inflation appears to be global, as the Swiss National Bank declared victory and cut interest rates by 25 basis points, along with the Brazilian National Bank, which cut rates by 50 basis points. The Bank of England followed the Fed, indicating the war on inflation was all but won, and interest rate cuts would be coming to the British economy soon enough. This was all great news for equity markets, which rallied strongly towards record highs. Bond yields tumbled and the currencies also followed suit. The US Dollar reversed losses, following the FOMC meeting, and gained ground against European and Asian currencies. The EUR tumbled to 1.0860, while the GBP crashed to 1.2650. following the BofE dovish commentary.

The rising reserve hit the commodity currencies, with the NZD falling to 0.6040, while the AUD dropped to 0.6560. The NZ Q4 GDP number, confirmed the lived reality, that NZ was in a deep recession. NZ growth contraction, was despite a massive surge in immigration, which adds to the dire nature of the economy in 2023. The damage done will take some time to repair and the currency reflects that reality. The Australian headline Unemployment number nosedived, plunging from 4.1% to 3.7%, which contrasts against the gloomy news from across the Tasman and was reflected in the NZD/AUD cross rate.