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Daily Market Commentary 4th August 2023

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The Bank of England raised rates by 25 basis points, as expected, keeping the pressure on inflation . The UK is suffering some of the highest inflation levels in the Western world, but they are beginning to ease, so the Bank has no room for inaction. The GBP briefly dipped below 1.2700, but regained ground following the announcement, while the EUR was steady around 1.0950. The US Challenger Jobs report was better than expected, with only 23,697 jobs cuts, which could support a stronger Non-Farm Payroll number. The N-FP number is expected to be around 200,000 jobs added, so any major improvement would be a headache for the Fed. The Federal Reserve is hoping that the labour market will cool, thus reducing the pressure on inflation, which allows the cessation of rate rises.

Global PMI data continues to weaken, confirming recessionary pressures, leading to a slowing in commodity demand. The associated currencies were able to stabilise after recent losses, with the NZD holding 0.6050, while the AUD consolidates above 0.6500. Market attention now turns to the all-important Non-Farm Payrolls number, set to be released tonight, and how that will impact the Fed’s monetary policy.

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