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Daily Market Commentary 20th July 2023

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Market confidence continues to return, with equities flying higher and bond yields tumbling. Cooler inflation in Europe and the USA, has allowed markets to turn the page on rising interest rates and look forward to a return to more favourable economic conditions. UK inflation fell more than expected, plunging from 8.7%, to 7.9%. This will come as a welcome relief to the Bank of England and the long-suffering British consumer. EU inflation fell back to 5.5%, from 6.1%, although core inflation remains stubbornly high. The easing of pressure on the Bank of England and the ECB, allowed the associated currencies to drift lower. The EUR slipped back below 1.1200, while the GBP crashed back to 1.2920.

NZ inflation also fell back, from 6.7% to 6%, although not as much as expected. This was good news for the RBNZ, easing pressure to further hike interest rates, pushing the NZD back to 0.6230. Markets will be watching Australian employment data, set to be released today, which will impact inflation expectations heavily. The AUD also suffered a rebound in the reserve currency, falling back to 0.6750.

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