Daily Market Commentary 13th July 2022

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The EUR traded briefly below parity with the US Dollar, for the first time in 20 years, but looks set to go lower. The important German ZEW Economic Sentiment Index crashed to minus 53.8, reflecting the economic collapse being suffered in Europe and more particularly the energy/gas crises in Germany. The EU has imposed heavy sanctions upon Russia, for the military invasion on the Ukraine and these are taking a severe toll on EU member states. NordStream1 has been shut down for maintenance, following severe restrictions on gas supplies to Germany and Europe. This has the potential to cripple German industry and severely impact the public consumer. The GBP also trades lower, falling below 1.1900, while the Yen has been trading a 20 year lows.

Markets await the all important US CPI number to be released tonight and it is expected to rise above the record 8.6%, recorded last month. The blow-out inflation is driving interest rates higher and none more than the US, which is smashing the commodity currencies. The AUD fell back to trade just above 0.6700, while the NZD crashed to 0.6100, ahead of the RBNZ interest rate decision. The RBNZ are expected to raise rates once again, probably 50 basis points, which would normally boost the currency? The current market may not judge this to be so, as interest differentials diverge.

All eyes are on the RBNZ and their monetary policy statement, while they will quickly then turn to the US and the all-important CPI number.

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