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Daily Market Commentary 19th July 2023

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Equities continue to surge to record levels, boosted by market confidence, which builds momentum as inflationary pressures decline. Canadian inflation is in sharp decline, with steep falls in both CPI and PPI, allowing speculation of further rate rises to dissipate. In the US, economic conditions remain tough, with both Industrial and Manufacturing Production falling into negative territory. Retail Sales remained positive, but missed expectations, as the consumers suffer reduced disposable income. It appears markets have put the inflation crises firmly into the rear-view mirror and moved on. The US Dollar remains soft, with the EUR holding 1.1200, while the GBP drifted back towards 1.3000.

The RBA minutes revealed that inflation remains a major threat to the Australian economy and that the rate pause at the last meeting, was due to weakening economic conditions. There was a warning in the minutes for the incoming Governor, that inflation remains a serious challenge to the Australian economy, and it may not be just plain sailing. The AUD fell back to 0.6800, while the NZD lost ground, dropping to 0.6250 ahead of the release of key Q2 inflation data. Inflation is expected to fall sharply in New Zealand, so any upside surprises, would not go down well.

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