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Daily Market Commentary 3rd July 2023

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Markets closed the week out brimming with confidence, despite fears of recession, inflation and the banking crises. Concerns of a ‘Banking Crises’ were allayed somewhat, when the Fed’s stress tests, passed the US banks with flying colours! This is somewhat surprising as circumstances have not changed markedly, since the last Bank collapse, but now the Fed assures markets of the Banks collective soundness? This when Fed Chair Powell previously denied the Fed’s role in oversight and    management of the Banks? Inflation that has been driving rising interest rates and the recessionary pressures, but inflation fears are on decline, despite Central Banks’ warnings of future interest rate rises.. The optimism stems from inflation data suggesting US inflation is in decline, with the latest PCE indicator in the US, confirming a decline in inflation. Market optimism was reflected in equities, which surged to near record highs last Friday, while bond yields and the US Dollar settled lower. The EUR regained 1.0900, while the GBP headed back towards 1.2700, despite an anaemic GDP reading.

The surge in market confidence and the softer reserve, allowed the commodity currencies to gain some stability. The AUD bounced strongly off 0.6600, while the NZD surged back above 0.6100. The coming week is a busy one, data wise, with the RBA’s latest monetary policy decision, culminating in US Non-Farm Payrolls. The Fed is looking for an easing in the labour market, to confirm the rate rises are having an impact and quelling inflationary pressures.

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