Daily Market Commentary 22nd June 2023

UK inflation did not fall, as expected by markets, but held at the very elevated level of 8.7%. Core inflation actually rose, from 6.8%, to 7.1%, reinforcing the crises the Bank of England faces. The B of E has no choice, but to raise interest rates again tonight, the question now being by how much? The Bank is unable to address the root cause of the problem and that is fiscal vandalism, with massive deficit/debt spending, by a reckless Government. The debt monitisation by the Central Bank, not only allows the fiscal irresponsibility, but enables it. The actions contradict any perceived independence the Bank of England has. UK Gilts are hitting levels not seen since the GFC and are surely at crises levels, which had only recently caused the downfall of the ‘lettuce PM’, Liz Truss. In the US, markets follow the Congressional testimony of Federal Reserve Chairman, closely. Powell re-iterated that the Fed had ‘a long way to go’, in the fight against inflation. The US Dollar remains soft, with the EUR rising to 1.0950, while the GBP trades at 1.2750 ahead of the Bank of England rate decision.

The softer reserve allowed the NZD to advance towards 0.6200, while the AUD approaches 0.6800. The Bank of Japan minutes confirmed the steadfast commitment of the Central bank, to stimulative monetary policy and embraced Quantitative Easing (QE). The TANKAN report showed signs of improving economic conditions in Japan. Local markets will watch NZ Trade data, set to be released later today, while monitoring the Bank of England actions and the Fed Chairman’s answers to US Lawmakers.