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Daily Market Commentary 21st July 2023

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US Equity markets continue to surge into record territories, with confidence growing as the inflation crises cools. Bond Yields are tumbling as expectations are that ‘peak inflation’ has been overtaken and interest rates have also peaked. The economic data continues to reflect the tough economic conditions experienced in most Western economies, due to the battle on inflation and high interest rates. The Philly Fed Manufacturing Report remained in heavily negative territory, confirming the challenging conditions in the Manufacturing sector. The US Dollar regained some ground and pushed the EUR back to 1.1120, while the GBP crashed back to 1.2850.

Japanese markets went into negative territory, following their unexpected trade surplus. The trade surplus was good news, but how they  got there was not. Japanese Exports contracted 1.5%, while imports collapsed by 12.9%. This was not good news for the commodity currencies, who had a double-whammy, suffering a rising reserve. The NZD crashed to 0.6220, while the AUD dropped to 0.6770, despite a stronger than expected Unemployment number. Australian headline Unemployment fell to 3.5%, which is good news, but not what the RBA is looking for . The RBA is looking for the labour market to slacken, in the war on inflation and rising interest rates, but it has not. This will send a unwanted message to the RBA Governor.

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