Daily Market Commentary 28th July 2022

The Federal Reserve raised interest rates by 75 basis points to 2.5%, in an effort to combat robust and rampant inflation. The bond yield curve has turned negative, screaming recession, which may well be confirmed with a negative GDP number to be released tomorrow. The IMF has downgraded global growth prospects and Europe’s economic prospects, look extremely gloomy. The shortage of gas in Europe only adds to the energy crises, which will only escalate into the colder winter season. The US Dollar drifted, with the EUR rising to 1.0140, while the GBP crept to 1.2050.

Australian headline inflation hit 6.1%, a rise of a full percentage point, forcing the RBA into more aggressive action. The RBA has been in collusion with the Government in a fiscal deficit/debt explosion, via monetary expansionism, as have most western Central Banks. The Central bank ‘enabling’ has been political and has ignored their supposed focus, which is inflation. The softer reserve did little to assist the currency, which now looks at falling below 0.6900, while the NZD may break under 0.6200.

The rising interest rate environment only ensures recession and the question is now, ‘how deep’?