Daily Market Commentary 2nd February 2022

The RBA left interest rates on hold, using the damage inflicted by the latest COVID invasion as an excuse, while ending QE. The Australian economy was severely damaged by the lockdowns and tough restrictions imposed by the Government in 2021, but the highly infectious (but much milder and less damaging omicron) has been allowed to blow through the country, cynics may say the General Election may have some influence? The devastation to the economy has ensured inflation is restrained, in terms of official measures, but supply problems and cost-of-living pressures are prevalent. The AUD rallied overnight, to trade up to 0.7100, while the NZD regained 0.6600. NZ Employment will come into focus in domestic trade.

US markets were flat overnight, following weaker Manufacturing PMI and ISM reports. Attention will turn towards the Non Farm Payrolls number,  set to be released Friday, while European markets will focus on the ECB and Bank of England rate decisions. The Bank of England is likely to raise interest rates once again, while the ECB will likely leave rates on hold. The EU is experiencing lesser inflationary pressures and weaker growth, while the UK is in an inflationary, growth environment. The weaker US Dollar saw the EUR bounce to 1.1240, while the GBP reflects the economic environment and rallied to 1.3500.