Daily Market Commentary 8th September 2023

European markets were focused on growth, with the EU missing a technical recession, by the narrowest of margins. EU Q2 GDP growth came in at 0.1%, with Q1 reviewed upwards from negative growth, to zero. Member Countries continue to struggle, and the data appears extremely fortunate to miss the definition of a technical recession, conveniently most of the time. Will this continue into Q3 and Q4? Probably not as Germany, the past engine room of Europe, looks set to slump into a deep, de-industrialised recession. German Industrial Production contracted minus 0.8%, for July, in an environment that threatens even steeper energy challenges. Interest rates may continue to rise as inflation remains stubbornly high, only contributing further, to the difficult economic conditions. The EUR looks to hold 1.0700, while the GBP has slumped below 1.2500.

The currency and bond markets were relatively steady overnight, allowing the commodity currencies to stabilise. The AUD held above 0.6350, while the NZD is looking to build above the lows, of 0.5860. Extremely weak domestic economic data is only being exaggerated by the softness in commodity prices. Inflation and high interest rates remain an extreme economic challenge, while the Chinese economic rebound has yet to eventuate. Look for further inflation readings from Europe and growth data, to lead the markets, to a close out of a mixed trading week.