Daily Market Commentary 6th April 2023

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The RBNZ shocked markets with a huge and unexpected 50 basis point interest rate rise. The RBNZ cited the reason was that inflation was ‘far too high and persistent’. The RBNZ knows inflation is out of control, as does the NZ consumer, although the tampered official inflation measure of the CPI does not accurately measure this. Like many economic measures, it must be taken as a trend rather than an accurate measure, due to ‘improvements’ in calculation over the years. This directly contradicts the RBA, which cited ‘’peak inflation in their decision to pause rate hikes. The RBA has been far more ‘dovish’ in their approach to the inflation cycle and has let inflation get away on them, due to political pressures. The NZD reacted accordingly, spiking above 0.6350, but settling back around 0.6300, while the AUD holds 0.6700.

The US markets are focused on the labour markets and the Non-Farm Payroll number due out Friday. The Jolt Job Openings reported a fall in job openings, under 10 million for the first time in two years, while the ADP Jobs reported a slowing in private sector jobs added. Perhaps the hot job market is cooling, as the Fed has hoped for, allowing the rate hikes to also slow, or even pause? The Fed has already indicated this and it would be timely, considering the impact the sharp rate rises have had on the emerging banking crises. Oil prices are a major worry, following the surprise production cuts by OPEC+, adding another twist to the inflation story. A recession looms large for the 2023 year but the size and length of it, is all important. The EUR settled around 1.0900, while the GBP pushed up to 1.2540, as the UK economy suffers under persistently high inflation and interest rates.

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