Daily Market Commentary 3rd March 2023

EU inflation came in above expectations, coming in at an annualised 8.5%, where markets had expected a sharp fall. This follows hotter than expected inflation readings in both France and Germany. The overall impact is steady and substantial rises in bond yields in Europe and the USA. French, German and UK Bond Yields are reaching towards record highs, while the US 10 year has just blown through 4%. This is putting pressure on the economy and providing attractive investment opportunities, thus damaging equity markets. The USD was a beneficiary overnight, with the EUR falling back to 1.0580, while the GBP plunged to 1.1930. The latest PMI manufacturing data confirmed the ISM manufacturing number, showing a continued contraction, in the US manufacturing sector.
 
The rising reserve halted the rebound in commodity currencies, with the AUD falling back to 0.6700, while the NZD retraced to 0.6200. Australian Building Permits contracted 23.6%, for the month of January and 8.4% for the year. Rising interest rates are taking the toll on the building sector and the housing market. Today markets will follow the NZ Consumer Confidence number and Australian Services/Composite PMI data, will be in the spotlight while Japanese inflation data, will continue the global inflation narrative.