Daily Market Commentary 27th July 2023

The Fed raised rates by a further 25 basis points, in line with expectations and to a 22 year high. The Federal Reserve Chairman, Jerome Powell, indicated that inflation has moderated, but core inflation remained at elevated levels. Equity markets continued the extended two-week rally in equities and market confidence continues to build. The Fed Chair did mention that the Housing Sector was showing signs of recovery, but still from a depressed base, but the latest data did not confirm this. New Home Sales, Building Permits and Weekly Mortgage Applications all came in decidedly negative in their latest reading, released today. There was little movement in the US Dollar following the FOMC meeting, with the EUR trading 1.1010, while the GBP rallied to 1.2940.

The reserve remained steady, and confidence continues to build in the US economy, allowing the reserve to settle. The NZD was steady around 0.6200, while the AUD drifted to 0.6750, following the release of local inflation data. Australian inflation was lower than expected, crashing back from 7%, to 6%! This was a very big move and much better than expected. It must be a welcome relief to the RBA and a gift to the new incoming Governor. This will ease the pressure on the RBA and support for the AUD. Markets are now looking ahead to the ECB rate decision, set for tonight, while the Bank of Japan will release their latest decision tomorrow.