Daily Market Commentary 25th August 2023

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US and European bond yields continue to trade at elevated levels, awaiting some directional influence from the key Central Banks, at the Jackson Hole Symposium. Fed Chairman Powell and ECB Chair LeGarde, are scheduled to speak at the symposium today, so markets keenly await the narrative extended. There had been expectations that Powell would highlight the sustained and hot inflation, in the US economy, recognising the need for further interest rate rises. This has boosted bond yields recently, jumping to 2007 levels, but sobering economic data from Europe, will add pressure on Central Banks to ease monetary policy? The latest round of PMI data was unsettling, as Services PMI joined Manufacturing PMI, in the doldrums. The US Dollar pushed upwards, with the EUR dipping to 1.0820, while the GBP crashed to 1.2600.

The rising reserve snuffed out the rebound in the commodity currencies. The AUD wiped out recent gains, tumbling back towards 0.6400, while the NZD crashed back to 0.5900. Market focus is on the Jackson Hole Symposium, meanwhile the BRICS Summit is proceeding in South Africa, quietly expanding their membership, rivalling the Wests ‘G7’. BRICS added new member States and a long list of prospects, with potential threats to the unitary reserve system, rising fast. Member States are now encouraged to transact trade in local currencies and are developing a common settlement currency, to rival the previously unrivalled, US Dollar reserve.

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