Daily Market Commentary 12th July 2022

Non Farm Payrolls beat expectations, which is a positive for the US economy, but may cement the Fed’s commitment to raising rates aggressively and as planned. The rate rises so far have not dampened the labour markets, so it ‘green lights’ hawkish monetary policy. Markets keenly await the US CPI number, out this week, which is expected to climb above the record 8.6%, released last month. Inflation is the focus of the Federal Reserve, so all eyes are on this weeks inflation numbers.

US bond yields continue to show inversion, pointing to a recession, as does preliminary GDP data. The speculation of rising rates in the US has boosted the US Dollar, with the EUR looking to test parity, while the Yen hit 1998 lows (137.75). UK Political turmoil continues, as a plethora of Tories vie for the Prime Ministership, and the GBP collapses to traded 1.1870.

Commodity currencies have lost their shine, with the recession hitting demand, while the reserve dominates. The AUD has crashed to 0.6720, while the NZD fell back to 0.6100, ahead of the RBNZ meeting this week.