Daily Market Commentary 14th July 2023

UK GDP growth turned negative for May, with a fall of minus 0.1%, while industrial and manufacturing production continued to contract heavily. The terrible economic data continues to flow, in the UK, and yet they suffer the highest inflation rates of major economies and continue to operate massive deficits. The Bank of England appears content to drive up interest rates, hitting mortgage holders and consumer demand hard, while pumping out liquidity, funding massive fiscal deficits and inflation. US Bond Yields tumbled further, following the better-than-expected CPI number released the previous trading day, while PPI was positive. The PPI number came in at 0.1, so an easing of input prices, but still an increase. The falling yields worked in tandem with the precipitous falls in the US Dollar, with the EUR blowing through 1.1200, while the GBP surged past 1.3100.

Chinese trade data was not good, with a dramatic fall in both exports (minus 12.4%) and imports (minus 6.8%), although the surplus was extended. The post-covid restrictions recovery has been extremely weak and will translate directly into commodity demand and prices. Nonetheless, the collapse in the reserve allowed the commodity currencies to extend gains, with the AUD charging towards 0.6900, while the NZD fast approaches 0.6400. These big currency moves, are all about the once mighty US Dollar, rather than any domestic push-factors.