Daily Market Commentary 17th July 2023

Markets closed out a great week of gains on equity markets, rallying towards record territory, enthused by the big falls in US inflation. Tumbling inflation rates eased the pressure on the Federal Reserve to continue interest rate rises, although they will look for an easing of labour market conditions, before the cycle is complete. The tightening cycle in monetary policy, across the globe, may be at an end, but it has delivered recessionary conditions, especially in Europe. This coming week will look at European, Japanese and NZ inflation levels and the impact on their respective monetary policies. Chinese GDP growth is also set to be released and expectations are for well above 7% annually. US Bond Yields and the Dollar remain soft, allowing the EUR to trade above 1.1200, while the GBP will hold around 1.3100.

The softer reserve has allowed some rebound in the commodity currencies, with the AUD trading above 0.6800, while the NZD surged through 0.6300. The NZD will be impacted by the Q2 CPI number, set to be released Wednesday, and expectations are for inflationary pressures to cool. Australian employment will be a focus during the week, although much of the news, to close out the week, was the dismissal of the Governor of the Reserve Bank of Australia. He was rewarded for his failures managing the inflation cycle, but the timing was purely political and a way of apportioning blame for higher mortgage rates.