Daily Market Commentary 28th August 2023

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The curtain came down on the Kansas City Fed’s annual Jackson Hole Symposium, in Wyoming. The crescendo built to the address of the Federal Reserve Chairman Powell. Powell warned of future inflationary pressures and further rates rises, if appropriate. There was nothing new and no surprises, so bond yields remained steady, at elevated levels, and the US Dollar remained strong. US equities surged to close out a week of recovery on the stock markets. The Central Bankers meeting was a highly promoted and covered event by the media, but was an almighty yawn, for the rest of us. The global event that went under the radar, with the media, was the BRICS Summit in South Africa. They quietly accepted new members and are considering many more prospects, all the while adding alternative settlement systems, for memberships trade. The BRICS now rivals and exceeds the Wests G7 by nearly every metric. This is a serious challenge to current global trading system and the hegemony of the US Dollar, as the sole global reserve currency. The University of Michigan Economic Sentiment report, released Friday, was more gloomy news, falling to even lower levels. Markets will look ahead this week to US employment, and European/US inflation readings, while the US Dollar will open the trading week strongly. The EUR has retreated back to 1.0800, while the GBP has tumbled all the way back to blow 1.2600.

The rising reserve pushed the trans-Tasman currencies back to the previous trading lows, with the AUD dropping to 0.6400, while the NZD tests the downside of 0.5900. Elevated US bond yields are supporting the stronger US Dollar, and increasing downward pressure on these currencies, while flagging commodity demand dents prices. The coming week will focus on inflation and growth, while monitoring the US Jobs market closely. The tight labour market, and upward pressures on wage/price spirals, remains a big concern to Central bankers.

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