Daily Market Commentary 27th January 2023

A stronger than expected US GDP growth number, coming in at an annualised 2.9%, boosted equity markets in Europe and the USA. Positive growth in the US economy is welcome and boosted by inflation thriving in the economy, but also positive signs are starting to appear in the housing market. New Home Sales in the US jumped 2.3%, which is the first sign of ‘green shoots’ in a thoroughly down-trodden leading housing sector. US Durable Goods Orders also jumped 5.6%, although the Kansas City Fed Manufacturing Index remained deeply negative, alongside the Chicago Fed National Activity Index. All eyes are now on the Federal Reserve, with their favoured inflation indicator (the PCE), due to be released tonight? The positive market rally has been built on ‘peak inflation’, so any miss in the PCE will be treated harshly. The US Dollar was steady, with the EUR trading 1.0850, while the GBP traded above 1.2350.

Commodity currencies continue to thrive in the positive global economic environment, with the AUD flirting with 0.7100, while the NZD trades around 0.6450. The surprisingly strong inflation reading in Australia has put immense pressure on the RBA, to take back control of the inflationary problem and get ahead of the curve. They will need act decisively and flag a strong commitment for future monetary policy. Local Markets will be watching the release of Australian PPI numbers today, to gauge further inflationary pressures, while NZ Business Confidence will need to improve sharply.