Daily Market Commentary 7th March 2023

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Chinese growth forecasts were lower than expected, with growth of 5% forecast for the coming year, lower than last year’s 5.5%. This was a disappointment for markets and more especially for the commodity currencies. The NZD fell back to 0.6180, while the AUD dropped to 0.6720, ahead of the key RBA rate decision today. The RBA is expected to hold the line, with yet another marginal rates increase, of just 25 basis points. The RBA is reluctant to get ahead of the curve, like many of the other Western Central banks, due to the impact on the heavily indebted housing sector and the consumer generally.

US markets will focus on the testimony of Fed Chairman Powell’s in front of Congress on Tuesday and Wednesday, before turning attention towards towards the all important Non-Farm Payroll number , released Friday. The last number was an ‘out of the box’ belter and provided a green-light for the Fed’s current aggressive monetary policy. US Factory Orders contracted 1.6%, while European Retail Sales fell 2.3%, in an increasingly tough economic climate. Inflation remains the key driver to Central bank action and bond markets. US Bonds retreated over the last couple of trading days, allowing the EUR to push back up towards 1.0700, while the GBP holds above 1.2000.

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