Daily Market Commentary 23rd June 2023

The Bank of England reacted dramatically to the higher-than-expected inflation reading, from the previous day, raising rates by 50 basis points. The CPI the previous day, confirmed inflation remained at extremely elevated levels and core inflation actually rising further. This was enough for the Central Bank to take action. Gilts, or UK Bond Yields are trading around GFC levels and are causing rising levels pain, but not enough ,according to the Bank. The real problem is the white-hot money printing machine in the banks back office. The Norwegian Central Bank also joined the party, raising rates by 50 basis points and even the Swiss National Bank raised by 25 basis points. The Fed Chairman followed yesterday’s hawkish testimony to Congress with further warnings. Fed Chairman Powell warned that ‘more rate hikes were likely’. The dramatic action on the monetary side of things did not rattle the currency cages too much, with the EUR trading around 1.0950, while the GBP holds around 1.2750.

The Yen continues to flounder, falling to YEN143.00, as the Bank of Japan remains steadfast on loose monetary policy. The tighter monetary conditions will cause recessionary pressures and this does little for the commodity currencies, with the AUD slipping back to 0.6750, while the NZD fell back below 0.6200. Markets await PMI data from Asia, Europe and North America.