Daily Market Commentary 24th April 2023

A subdued close to a relatively negative week on equity and currency markets. A week dominated by US earnings season, but low expectations, meant little was achieved. UK inflation was one of the lowlights, showing there was plenty of inflationary pressures remaining in the UK economy and therefore hawkish monetary policy will continue, from the Bank of England. The ECB have continued to reiterate their stance, holding the line on continued rate rises, until the inflation genie is back in the bottle. The Federal Reserve has forecast one more rate rise, before they institute a pause, in order to evaluate the impact of rate rises on inflation, to date. The coming week will be focused on growth and inflation, with GDP data set to be released across Europe and the USA. Key inflation data from Europe will measure the ‘peak inflation’ narrative, that has been portrayed in the media. US PCE inflation will also be released at the end of the coming week. This is the preferred measure of US inflation for the Fed and has been consistently confirming stubborn, underlying core inflation. The softer US Dollar has allowed the EUR to trade around 1.0950, while the GBP has held above 1.2400, with more rate rises supporting the currency to come.

Commodity currencies have been beneficiaries of the softer reserve, but the threat of recession in the US and Europe, has taken the edge off these currencies. The NZD has tumbled back towards 0.6100, while the AUD dipped back below 0.6700. The RBA minutes revealed more rate rises were on the cards, while the RBNZ’s aggressive approach to fighting inflation, is necessary and perhaps working? NZ headline inflation dipped, but this was due to tradeable external pressures falling, while Non-Tradeable inflation continues to remain stubbornly high. This is what concerns the RBNZ, as it is the driver of the pain that the NZ consumer is feels. The coming week will focus on global growth and inflation, but will be a fairly quiet start to the week on the local front, as ANZAC Day falls on a Tuesday.