Daily Market Commentary 6th September 2021

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Non Farm Payrolls was a catastrophic miss in market expectations and triggered further selling in the US Dollar, only adding to recent losses. The dramatic miss in jobs added to the US economy, is extremely detrimental to the economic recovery narrative and exemplifies the trouble the US economy is really in. This number will probably ensure that the Fed defers promised tapering of QE and certainly ensures extended historically and unnaturally low interest rates, ensuring they are here for some time to come. This will also bring pressure on the Biden regime to push through further fiscal stimulus, which will only compound the problem of spirally, out-of-control, deficit and debt.

The failing economy in the US will only drag an already challenged global economy with it. The collapse of the US Dollar is now a major concern and will bring up questions of the ‘reserve status’ of the once mighty Dollar. The endless debt monitisation and money printing, had to have an impact and perhaps this is the beginning of the end? The EUR jumped to trade 1.1880, despite the feeble and vulnerable European economy, while the GBP pushed up to 1.3880.

Australian and NZ lockdowns are having a devastating effect on the economy and business and this is starting to come through in economic data. Australian Services/Composite PMI collapsed and Retail Sales contracted 2.7%, while the NZ lock-down was more recent, it will have equal adverse effects. The collapse in the reserve forced the commodity currencies higher, which will not improve exports receipts and terms of trade. The AUD surged above 0.7450, while the NZD broke above 0.7150, despite the crushing local economic conditions.

Market will focus on growth, inflation and Central banks in the coming week. The RBA. Bank of Canada and ECB all announce interest rate decision. Any thoughts of tapering QE will be out the window and interest rates will remain at record lows. Inflation in the form of CPI and PPI will continue to flash massive warning signals, that will be ignored or dismissed as ‘transitory’. Dark economic times await.

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