Daily Market Commentary 25th July 2023

US equities continue to post gains, as confidence surges ahead of the important Fed and ECB meetings. The assumption that inflation has been conquered and ‘peak interest rates ‘ have arrived, appears to be at hand. The Fed meets this week, the last time until September, and they are expected to raise rates for the last time in this cycle. Flash PMI data in Europe was terrible. Manufacturing PMI was heavily negative and this has been led lower by German manufacturing, which has collapsed. European manufacturing has been crushed by the energy crises supply and pricing, while the causes of the energy crises remain. The ECB is also meeting later in the week and has promised further rate rises, despite cooling inflation, as they have been very late to this party. The impact was not good on the currencies, with the EUR slipping to 1.1080, while the GBP headed back towards 1.2800.

Japanese and Australian flash PMI was also very weak and this will only reinforce the Bank of Japan’s intention to hold interest rates, at extremely stimulative levels. Market confidence has been a support for commodity currencies, with the AUD consolidating above 0.6700, while the NZD looks to regain 0.6200. All eyes remain on the Central Bank meetings, later in the week.