Daily Market Commentary 6th October 2022

The RBNZ lifted rates a further 50 basis points, in line with expectations, citing excess global demand over supply and the energy crises, as reasons for extreme inflationary pressures that need to be overcome. The RBNZ is holding the line and re-committing to their hawkish monetary policy, which is to be commended, while the RBA surprised markets with a lesser than expected 25 b.p. rise. These will feed through to higher cost-of-money, capital investment and mortgages. The consistent policy allowed the NZD to stabilise above 0.5700, while the AUD remains below 0.6500.

European markets were suffering extreme inflationary pressures and the ECB meeting overnight, assured markets they will aggressively raise rates to fight inflation. QE continues through another program (PEPP), but this is highly political and used to manipulate through bond purchases of selective countries. European Services and Composite PMI was depressed, with both German and EU numbers sinking heavily into contraction mode. Europe is already in recession, which has yet to be confirmed by technical data, but now the question is how deep? The EUR fell back to 0.9950, while the GBP plunged back below 1.1300, despite the UK Governments reversal of the unfunded tax cuts.

Global Bond Yields are moving ominously higher again and OPEC+ just announced a 2-million barrel/day cut to oil production, which will not help ease the energy crises. All eyes will begin to focus on the US Non Farm Payrolls number set to be released tomorrow.