Daily Market Commentary 2nd November 2023

The Federal Reserve left rates unchanged and looks to have accepted that inflation is falling, and the jobs market is beginning to soften. This was in line with market expectations and was welcomed by markets, with bond yields drifting lower and equities continuing to rally. The Fed noted that the economy expanded at a ‘strong pace’ and job gains moderated but remain strong. This means that rates will remain ‘higher for longer’ or until inflation falls below 2%. This was good news for markets and sentiment improves, despite Geo-Political threats. The JOLTS Jobs Report showed job openings remained steady, while the ADP Jobs Report, showed private sector jobs added fewer than expected. The softer labour market is a green light for the Fed and allows them to cease rate rises. The USD was softer, allowing the EUR to rise to 1.0540, while the GBP traded 1/2110.

The softer reserve allowed the commodity currencies to push higher, with the AUD rising above 0.6350. while the NZD consolidates above 0.5800. Australian Manufacturing PMI was weaker than expected and remained firmly in contraction mode, while Building Permits contracted by 4.6%, plunging 24.6% for the year. Economic conditions remain tough, but the halt to interest rate rises, provides a more certain future, although Geo-Political issues and energy prices provide a caveat.