Daily Market Commentary 24th August 2022

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European and US equities markets remained soft overnight, unsupported by economic data and fears over rising interest rates and recession. European flash PMI data was extremely weak, with Australian, Japanese, European and US PMI data, contracting on many fronts. The energy crises in Europe is only getting worse, as Russia prepares to shut down Nord Stream 1 completely, at the end of August. This is supposedly only temporarily, but enough to see electricity and gas prices spiral into the heavens. This will drive the European economies into a deep recession, unless arrested, which seems unlikely in the near future. Gas prices have gone from EUR$3/megawatt hour, two years ago, to EUR$300/megawatt hour today! This is astounding and not sustainable.

Markets continue to wobble ahead of the key ‘Economic Symposium’ to be held this week in Jackson Hole, Wyoming. Keynote speaker, Federal Reserve Chairman Powell is likely to confirm aggressive interest rate rises and QT expansion. Tighter monetary policy is an all out war on rampant inflation, punishing the economy and cost-of-living. The US Dollar was softer overnight allowing the EUR to flirt with parity, trading  0.9960, while enabling the GBP regain 1.1800.

The softer reserve and stronger commodity prices allowed the associated currencies to regain some lost ground. The AUD regained 0.6900, despite negative flash PMI data, while the NZD pushed back up to 0.6200. Jackson Hole speculation and trepidations dominates market trade.

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