Daily Market Commentary 26th July 2022

Markets opened the week quietly, with no major economic data releases. US equities have had a strong month in July and this coming week will become a big test, with both the FOMC rate decision and the US Q2 GDP number to be released. The Fed is likely to raise rates a further 75 basis points, in an effort to combat record inflation, while the Q2 GDP number is probably going to be negative, confirming a technical recession in the USA. The Dallas Fed Manufacturing Index plunged into deeply negative territory, as did the Chicago Fed National Activity Index.

The German Ifo Business Climate is falling like a stone, as German business suffers the ever-degenerating energy crises, which looks like extending into the Winter. Germany is the factory of Europe and runs on cheap gas. The supply has been starved and costs have blown out. The impact on Europe is devastating, not to mention the pain for the consumer, as heating demand rises into the colder season. The EUR managed to regain 1.0220, following the ECB 50 basis point rate rise, while the GBP rose to 1.2050.

The softer reserve allowed the commodity currencies to rally, with the AUD pushing up towards 0.6950, while the NZD hit 0.6250. The jump in NZ CPI numbers, to a record 7.3%, will ensure that the RBNZ continues to raise rates, putting further pressure on the cost-of-living for long suffering citizens. Markets will focus on inflation and growth, while trading on the FOMC rate decision.