Daily Market Commentary 12th January 2023

Markets continued the positive theme for the New Year, rising in Europe and the USA. Sentiment is high and equity markets are reflecting this, brushing off fears of a deep recession in Europe, as the energy crises eases. The energy crises was triggered by green energy policies adopted in Western countries, severely impacting supply and cost, which was the taken to a whole new level when sanctions were applied to the world biggest energy supplier. The Ukraine war is sill raging and green energy policies have taken a back seat, as Europe struggles for supply. A relatively warm European winter has cooled expected demand and allowed oil and gas prices to fall, thus easing recessionary fears. Markets keenly await confirmation of this, in the form of the US CPI number, set to be released tonight. It is expected to fall sharply, to around 6.5%, allowing pressure on the Federal Reserve to ease. Bond Yields have fallen, leading into the reading, so this becomes a key driver of market direction. The EUR held onto elevated levels, trading around 1.0750, while the GBP slipped back to 1.2100.

Commodity currencies have been beneficiaries of stronger prices, as global recessionary fears have shaken confidence, but positive sentiment has allowed a recovery. The AUD slipped back below recent highs of 0.6900, awaiting key trade data set to be released today, while the NZD trades around 0.6350. All eyes are on the US CPI number scheduled to be released tonight.