Daily Market Commentary 6th April 2022

The RBA left rates unchanged, in the latest interest rate decision, but the language hinted at rate hikes in the near future. The RBA is blind if it cannot see the surging inflationary pressures in the economy and this will translate directly into the economic data, soon enough. Cost-of-living, housing and food prices are all surging in the domestic economy, not to mention spiralling global inflation. The RBA language triggered a surge in the currency, which jumped above 0.7650, but settle back to 0.7600 in overnight trade. The commodity currencies have received support from the surge in commodity prices, but remain vulnerable, with rising inflation and interest rates testing economic growth. The NZD looks to hold 0.6950, but remains extremely vulnerable.

The ongoing and worsening energy crises and the emerging food crises in Europe, paint a dark picture for the future. The sanctions imposed upon Russia may well force a recession in Russia, but have backfired dramatically, on the already damaged European economies. The energy crises has become a nightmare, with talks of gas rationing and spiralling prices driving a deep recession. The Food crises is still to come, as Russia and the Ukraine provide a great deal of grain for Europe and around the world. We are seeing riots in Peru, due to cost-of-living pressures, and these are likely to spread around the world. The EUR fell back to 1.0910, while the GBP has crashed below 1.3100.

Turkish inflation rose to 61.1% and while this is at the extreme end of the scale, double figure inflation is hitting Europe already. New Zealand and Australia will both be impacted. Rising interest rates will bring on recessionary pressures.