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Daily Market Commentary 14th August 2023

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US PPI input prices came in higher than expected, but not at levels enough to cause alarm, matching the latest CPI. Inflation does remain stubbornly high (especially Core Inflation), while the lack of a Fed meeting in August, allows some room for fluctuations without too much market reaction. The University of Michigan Economic Sentiment report, continues to deteriorate, reflecting weak economic   conditions in the US economy. The green shoots are beginning to show in the UK economy, with a move to positive GDP growth, and improvements in both Manufacturing and Industrial Production. These positive signs are small and ‘baby steps’ and ‘One swallow not a summer make’. This was enough to boost the GBP, back towards 1.2700, while the EUR trades around 1.0950.

The coming week will focus on inflation, growth and employment. Local markets will have an emphasis on inflation and employment, with the release of the important Australian Unemployment number. Unemployment is expected to rise slightly, which is the sign of relief the RBA is looking for, calming wage/price pressures. The RBNZ is expected to leave rates unchanged, at the lofty levels of 5.5%, signalling an end to the aggressive rate rise cycle. The currencies will begin the week somewhat depressed, with the AUD opening below the key 0.6500, while the NZD has fallen below the ‘BIG Figure’ of 0.6000. High interest rates and a crumbling currency are serious concerns facing the ‘wokest’ of Central Banks, the RBNZ.

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