Daily Market Commentary 16th July 2021

The Federal Reserve Chairman Powell appeared before the Senate Banking Committee, for his bi-annual testimony and offered some compromise and alternative options. Inflation has been labelled as transitory and therefore to be ignored, but he considered the prospect that it may be longer term and said any reaction, would be for that time. He confirmed that inflation was ‘larger than expected, or that anyone had expected’. That the historical avalanche of liquidity, debt and deficit and never seen before expansion of the Fed’s balance sheet, would not result in massive inflationary pressures, is inconceivable? US Manufacturing and Industrial Production both increased by nearly 10%, along with a surge in the Empire State Manufacturing Index. The US Dollar continued to gain ground, with the EUR slipping to 1.1800, while the GBP tested 1.3800.

UK Unemployment data pointed to an almost unbelievable rate of 4.8%, but it is the massive amount of people not working, that are considered employed, that grossly distort the headline number. This was the case with the Australian Unemployment number too, which fell to 4.9%, despite the massive surge in lockdowns, spreading across the country. Governments have manipulated statistics to mislead the public to the extent of their economic problems. Chinese GDP missed expectations, but still came in at a healthy 7.9%, while Retail Sales jumped 12.1%. The destructive lockdowns are spreading across Australia, like their bushfires and the currency is suffering. The AUD fell back to 0.7410, exaggerated by the strong reserve, while the NZD fell back to 0.6970.