Daily Market Commentary 8th April 2024

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The Non-Farm Payroll number beat expectations, further fuelling speculation the Fed may continue to defer interest rate cuts, which appears to be the preferred default position. The good news from the US economy and the tighter the labour market, gives more flexibility to the Federal Reserve to hold interest rates at current elevated levels. This penchant for high interest rates is rationalised by the argument of stubbornly high inflation levels, but there are ulterior motives at play. The Non-Farm Payroll number was stronger than expected and the headline Unemployment number, fell to 3.8%. The seemingly strong economic position, is built on massive monetary and fiscal largesse, funded by debt. Debt and energy prices will become a focus once the inflation crises have completely faded. The coming week will focus on inflation and Central Bank activity. The Fed will release their minutes, from their last meeting, and there will be interest rate decisions from the ECB, RBNZ and the Bank of Canada. All are expected to leave rates unchanged, but may tease the markets, with the prospect of looming cuts. The EUR will open the week trading above 1.0800, while the GBP holds above 1.2600.

The commodity currencies suffered a firmer reserve, following the stronger than expected Non-Farm Payroll number, boosting support for bond yields. The AUD slipped back below 0.6600, while the NZD struggles to hold 0.6000, ahead of the impending RBNZ meeting and rate decision. The shake-up underway in the RBNZ leadership, is long overdue, as the Governor has done a shockingly bad job of managing the Central Bank. His focus appears to have been more on ‘woke’ cultural issues, than the core business of inflation and interest rates. The personnel changes will be a huge bonus for the Government and the people of NZ.

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