March 5, 2021 — 2 min read
Financial markets are in retreat this morning after Fed Chairman Jerome Powell failed to stem the recent rise in longer term US interest rates.
The markets are struggling to come to terms with the idea of the world returning to normal which will mean long term interest rates move back above 2.0%.
The US economy is already running at a 10% growth rate (see the Atlanta Fed GDP Now data) and the economy hasn’t yet fully re-opened. Growth is set to surge which will see everyone who wants a job get one and the Fed will find themselves in a real bind if inflation proves to be more than “transitory”
The US sharemarket in particular has doubled in value in the last year with many tech stocks rising 10 times or more in price. Tesla has looked the most overvalued trading up from 70 to 900 but has now dropped back to 600 and could even go a lot lower.
So the great boom in shares looks to be ending? Certainly creaking at the seams. The US Dollar looks set for a rebound as those longer term US interest rates move higher.
The Australian Dollar has been the darling of the spec traders so will be a key currency to watch with 0.7700 the level on the downside of AUD.
The NZ Dollar is down sharply this morning trading down below 0.7200 for the first time since mid February.
Importers need to make sure you have enough forward cover and exporters can dust off those order levels as the currencies might finally be heading down to your desired levels, especially so with US Non-Farm Payrolls out overnight.
NZDUSD 0.7190 -0.8%
NZDEUR 0.6006 0.0%
NZDGBP 0.5172 -0.4%
NZDJPY 77.52 -0.1%
NZDAUD 0.9301 0.0%
NZDCAD 0.9104 -0.6%
GBPNZD 1.9336 0.4%
AUDUSD 0.7734 -0.7%
AUDEUR 0.6457 0.0%
AUDGBP 0.5563 -0.3%
AUDJPY 83.41 0.0%
AUDNZD 1.0745 0.0%
GBPAUD 1.7976 0.3%