Daily Market Commentary 12th June 2023

Equity markets closed out the week higher, following a week of small gains, with no real major data surprises. The EU was dragged into an official ‘technical recession’ by the engine room of Europe, Germany. Germany has suffered the energy crises more than most, in their manufacturing and this has impacted most of Europe. The European recession has hit global demand hard and commodity prices are flagging. Inflation has been plunging across Europe, but remains far above the desired and stated goals, ensuring high interest rates will remain for some time to come. This is adding to the recessionary woes across Europe and the UK. This coming week will be highlighted by inflation readings across Europe and the USA, as key Central Banks meet to decide monetary policy settings. The FOMC meeting will kick things off, followed by the ECB and the Bank of Japan, late in the week. The ECB is the only Central Bank expected to push rates higher, but the Fed may surprise as inflation remains stubbornly high? The softer US Dollar allowed the EUR to close out the week around 1.0750, while the GBP will open trading next week pushing 1.2550.

The weaker reserve allowed the under-pressure commodity currencies to consolidate, with the AUD trading above 0.6700, while the NZD regains 0.6100. Local markets will be driven by the international markets strongly focused on Central banks and inflation. New Zealand will release historical GDP numbers, in the coming week, which may well confirm a technical recession.