Daily Market Commentary 7th February 2023

Negativity crept into markets, to begin the new week, following the outstanding Non-Farm Payroll number released last Friday. The US added 517,000 new jobs, blowing away market expectations, and triggering speculation that it may encourage the Fed to hold fast on their aggressive strategy to combat inflation. The economic data remains relatively strong, giving the Fed a green-light to raise rates and chase inflation out of the economy. This led to a spike in US bond yields and a surge in the US Dollar. The EUR plunged to 1.0720, while the GBP crashed, looking to test 1.2000 to the downside. The impact of higher rates and inflation is taking it’s toll on the consumer, with Retail sales in the EU falling 2.8%.

Local attention turns to the latest decision by the RBA on interest rates. The last inflation reading in Australia was a shock to most and this will ensure, that the RBA will raise rates by at least 25 basis points, with a hawkish outlook. The high debt levels will lead to tough times ahead for the property market and the consumer. Australian Retail Sales fell 3.9% in the latest reading. Tardy action by the RBA, in terms of monetary policy, has lead to this predicament. The resurgent reserve smashed the commodity currencies, with the AUD tumbling to 0.6860, while the NZD crashed to 0.6270.