Daily Market Commentary 27th February 2023

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US equity markets spiralled downwards, to close out a week of losses, dominated by inflation and the Fed’s anticipated actions. The Fed minutes revealed a strong consensus of members, holding the line on interest rates and committed to fighting the war on inflation, until it is back in the box. Boston Fed President, Susan Collins, was speaking of ‘higher for longer’ on interest rates. The Fed’s favoured measure of inflation is the PCE and that was released Friday, coming in higher than expected, hitting markets with a severe reality. Global Bond yields are reflecting the inflation reality and heading steadily northwards. German GDP for Q4, contracted 0.4%, reflecting the recessionary economic environment in Europe. The rising US Bond Yields are supporting a stronger US Dollar, with the EUR falling to 1.0540, while the GBP crashed to 1.1930.

Rising inflation and the surging reserve has also hit commodity currencies, with the AUD tumbling towards 0.6700, while the NZD tests the downside of 0.6150. The coming week will be dominated by global readings on inflation and growth, while NZ markets will watch the important Business Confidence number, released Tuesday. Australia will kick off Asian, European and North American readings of PMI data, which is always a good gauge of how economies are faring. Inflation remains the key economic driver of markets.

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