Daily Market Commentary 30th June 2023

US Banks passed the Fed’s latest ‘Stress Tests’, which was a relief to markets and allowed a rally in equities. Adding to the positive news was the US Q1 GDP growth number, which came in at a reassuring 2% pa, marginalising fears of a US recession. US Pending Home sales contracted by 2.1%, but data from the leading indicator (that is the housing sector), has been surprisingly good in recent times. The Swedish Central Bank (Riksbank), raised rates a further 25 basis points, to 3.75%. This did little to support the currency, which trades around record lows. German inflation took a nasty turn upwards, reversing recent trends, rising back up to 6.4%. This is not good news, and goes against the recent narrative of tumbling inflation in Europe. Higher interest rates and a deeper, more extended recession would be the probable result. The US Dollar continued to build strength, with the EUR falling back to 1.0860, while the GBP dropped below 1.2600.

The rising reserve and recessionary pressures from Europe, did little to aid the commodity currencies, with the NZD falling to 0.6050, while the AUD attempted to hold 0.6600. NZ Business Confidence data was an improvement, but remains heavily negative, as business operates in testing conditions. Markets will now focus on US inflation, with the release of the important PCE number tonight, which the Fed relies heavily upon, as an inflation indicator. Also in focus will be Chinese PMI and UK GDP growth.