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Daily Market Commentary 29th September 2023

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US Bond Yields hit a fresh 15-year high overnight, touching 4.675%, but drifted lower towards the close. German inflation data for September was in line with expectations, cooling back to 4.5%, but European Bond Yields continued to rise. Oil prices remain at extremely elevated levels and tight supply is expected to continue throughout the winter months. US Q2 GDP came in at 2.1%, annualised, but economic data remains weak. Pending Homes Sales contracted a further 7.1% in August, crashing 18.7% for the year. The Kansas City Fed Manufacturing Index tumbled to minus 13, reflecting the parlous state of manufacturing in the US. All eyes now turn to the US PCE inflation indicator, which is expected to confirm continued cooling of inflation. This is he indicator that the Fed follows closely, so the cooling trend must continue, or we might see further rises in Bond yields. The rise in European bond yields supported the EUR, which bounced back to 1.0560, while the GBP headed back towards 1.2200.

The easing in the reserve, allowed the commodity currencies some recovery. The AUD bounced back above 0.6400, while the NZD pushed back to 0.5950, boosted by a better-than-expected Business Confidence number. Domestic markets will be watching the release of Japanese inflation numbers today and then attention will turn to the US PCE inflation number out tonight.

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