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Daily Market Commentary 18th August 2023

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Fears over inflation, interest rates and the state of the banking sector, weigh heavily on markets overnight. Global Bond yields are surging, following the release of the Fed Minutes, confirming worries over persistent inflation. Ratings agencies Fitch and S&P, are both looking at the US Banking sector, and issuing warning signals and downgrades. US equities continue to tumble along with market confidence. Attention will turn to EU inflation, with the CPI reading, due for release later today. Inflation in Europe has been tumbling lower, but core inflation remains a big threat. The EUR traded down to 1.0860, while the inflationary pressures in the UK and the prospect of further rate rises, have pushed the GBP above 1.2700.

Australian Unemployment data pinched upwards, with the headline rate jumping to 3.7%, from 3.5%. The massive increase in immigration is beginning to ease the pressure on what has been an extremely tight labour market (which is what the RBA is looking for), to ease pressures on the wage/price spiral. This huge influx of immigrants into Australia is also boost GDP growth, giving the Government the desired growth narrative, but presents some challenging problems around housing, infrastructure, education and health. Local markets will focus on the Japanese inflation number, due to be released later today, while digesting the very weak trade data, coming from Japan in yesterday’s numbers. The AUD has suffered from the decline in demand and commodity prices, falling back to 0.6370, while the NZD looks set to test 0.5900, on the downside.

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