Daily Market Commentary 31st July 2023

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Equity markets closed out a week of further gains, following monetary policy decisions from the Fed, ECB and the Bank of Japan. The Bank of Japan left interest rates in negative territory, but did tweak the tolerance levels for 10 year bonds, allowing them to increase to levels not seen since September 2014. This sent Japanese equities tumbling lower, while the Yen weakened to 141.00. Markets accepted the rate rises from the Fed and the ECB, looking towards the future and the cessation of interest rate rises. European GDP growth data was very weak, with many nation States hovering around recessionary levels, lead by the extremely challenged German economy. The EUR regained 1.1000, to close out the week, while the GBP rebounded to 1.2850.

This coming week will focus on a series of employment reports, coming out of the US, culminating in Friday’s Non-Farm Payrolls. The Bank of England and the RBA also meet for their latest interest rate decisions, and both are expected to raise rates, a further 25 basis points. There will be extreme and overt political pressure to keep rates STET, but we shall see. The very weak and recessionary conditions suffered in Europe, meant downside pressure on commodities and the corresponding currencies. The AUD fell back to 0.6600 levels, while the NZD has retreated towards 0.6100.

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