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Daily Market Commentary 22nd August 2023

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The Central Bank in China cut one-year rates but left 5-year rates unchanged, in an effort to ease the pressure on borrowing costs, as the real estate sector comes under pressure, once again. Global Bond yields continue to surge, led by the US, with 10-year bond yields breaking 2007 highs. There are obviously inflationary pressures remaining and further upside to Central Bank interest rate rises. Speculation on Central Bank monetary policy will be the subject of much conversation this coming week, with the Jackson Hole Symposium later this week. This culminates in an address from Federal Reserve Chairman this coming Friday.  BRICS nations meet in South Africa this week, welcoming new members and prospects, with the potential to upset currency markets. There is talk of a rival ‘settlement currency’ for BRICS nations, which may challenge the reserve status of the US Dollar, into the future. The EUR looked to regain 1.0900, while the GBP looked to stabilise around 1.2750.

NZ Trade data was weaker than expected, with the deficit increasing, as exports fall and imports push northwards. The commodity currencies remain under pressure as demand weakens, allowing the NZD to fall to 0.5900, while the AUD briefly dipped below 0.6400. Attention turns to South Africa and the opening of the BRICS Summit today.

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