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Daily Market Commentary 27th October 2023

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The ECB left interest rates unchanged, in line with expectations, allowing the recession and the weak economy to do the ‘hard yards’ in the battle with inflation. The ECB noted the weak economy and weak demand, while recognising the ‘higher for longer’ mantra, applied to both inflation and interest rates. US annualised GDP spiked to 4.9%, from an expected 4.7% and surging past the annualised previous prediction of 2.1%. This is good news for the US economy but not what the Federal Reserve wanted to hear. The surging growth in the economy will only add to inflationary pressures and warrant further rate rises. US equities continue to collapse, as the S&P and the NASDAQ both head into correction territory. The ECB’s decision was not good for the EUR, which tumbled to 1.0530, while the GBP slipped to 1.2070.

Commodity currencies fared better than expected, despite a firm reserve, bouncing off previous lows. The AUD consolidated above 0.6300, while the NZD regained 0.5800. Geo-Political issues remain ‘front and centre’ for markets and the upward pressures this may add to commodities, led by Gold and Oil. Local markets will look at Japanese inflation data and NZ Consumer Confidence numbers.

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