Daily Market Commentary 26th June 2023

Global equity markets closed out a week of losses on Friday, mugged by Central Bank actions and narratives during the week. The Bank of England and the Norges Bank, both raised rates by 50 basis points and the Swiss National Bank by 25. This follows a rate rise by the ECB and assurances by both the ECB and the Fed of more to come. Federal Reserve Chairman Powell, appeared before Congress with an  aggressive and hawkish message of a war on inflation and more rate rises to come. Markets had dismissed the rhetoric on the day of the FOMC meeting, the week previous, but reality is slowly dawning. PMI data across Europe and the USA was soft and negative, with inverted bond yield curves also pointing to recession. The US 2/10 year bond yield gap has been negative for more than a year and expanding. The Dollar rebounded, with the EUR slipping back to 1.0850, while the GBP dipped below 1.2700.

The rising reserve pushed commodity currencies lower, with the NZD heading back towards 0.6100, while the AUD crashed under 0.6700. Recession is not good for commodity demand and China’s economic rebound appears to be tepid. The coming week will focus on growth and inflation, with European inflation data to be released and the important PCE measure, from the USA, later in the week. US and UK GDP growth readings will also be watched closely.