Daily Market Commentary 27th April 2023

Global equity markets continued to tumble overnight, in fear of the resurgent banking collapse, following revelations from the precipitous fall in deposits at the First Republic Bank. The banking crises is rooted in the regional banks, but threatens the whole sector. In the UK the Bank of England Chief economist warned UK residents that they are now poorer, due to the impact of inflation. Inflation hits the consumer hardest and hard asset holders least. The pandemic and the war in the Ukraine are cited as the cause of this rampant economic cancer, which is partially true, but at the heart of the problem is too much money being printed. This has expanded the money supply to fund reckless fiscal deficits run up by negligent leaders. The energy crises has aggravated the problem, but this was an own goal, as the energy crises was caused by the political sanctions on energy and not the war directly. Either way, inflation is a bitter pill to swallow and being reminded of his by one of the cooks of this ‘witches brew’ is a bit on the nose. The USD retreated overnight, with the EUR regaining 1.1030, while the GBP jumped back to 1.2450.

Commodity currencies continued to suffer from recessionary fears, impacting commodity prices, with the AUD trading below 0.6600 and the NZD falling to 0.6100. Australian inflation came in higher than expected, at 7%, which will probably force the RBA to end the ever so brief ‘pause’. NZ Trade numbers also deteriorated, with imports surging along with the trade deficit. Market attention will turn to growth, with the US GDP number set for release tonight, while local markets will await the NZ Business Confidence number out today.