Daily Market Commentary 7th June 2023

The World Bank issued warnings on global growth prospects in the West, citing high interest rates and inflation as the causes. The ECB President also warned that there were further rate rises to come as inflation, although heading lower, was too high at 6.1%. This sapped market enthusiasm along with the consumer, suffering higher interest rates and inflation, with EU Retail Sales plunging 2.6%. German Factory Orders also fell, as the parlous state of the once mighty German Manufacturing sector, becomes more apparent. The EUR drifted back below 1.0700, while the GBP struggles to hold onto 1.2400.

The RBA shocked markets, raising rates a further 25 basis points, with the prospects of more rate rises. The RBA is paying the price of inaction, following a relatively timid and dovish monetary attack on inflation, while the Government is fiscally working against the Central Bank. The Government is actively pushing for higher wage rises and encouraging a deadly ‘wage-price inflationary spiral’. The RBA realises the dangers, at least, and is acting accordingly. The AUD jumped in response, pushing up above 0.6650, while the NZD was also dragged above 0.6050. Inflation is alive and well in the Australian economy and hope is not a strategy.