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Daily Market Commentary 28th July 2023

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The ECB raised rates a further 25 basis points, as expected, and opened the door for a pause in rate rises, at the September meeting. This was met with enthusiasm and confidence by European equity markets, which surged higher. The peak in confidence and equities did not spread to US markets, which had a correction, from more than two weeks of rises. This may be just a technical correction to the extended rally, as economic data continues to impress. US Q2 GDP came in much stronger than expected, rising to 2.4%, while Durable Goods Orders also jumped 4.7%. US 10 year bond yields jumped above 4%, supporting a rise in the US Dollar, although the curve remains heavily negative. The EUR slipped below 1.1000, following the rate decision, while the GBP plunged below 1.2800.

The rising reserve pushed the commodity currencies lower, with the AUD testing 0.6700, to the downside, while the NZD dipped below 0.6200. Local market attention will now turn to the Bank of Japan and their latest monetary policy decision. They are expected to leave rates unchanged, but there may be some tweaks, as the Yen has surged to 139.10, ahead of the Bank’s decision.

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