Daily Market Commentary 5th August 2022

The Bank of England raised rates overnight by 50 basis points, the most since 1995, in an effort to arrest runaway inflation. Inflation is running at a record 9.4%, in the UK, and is wreaking havoc in the economy and leading to a cost-of-living crises. The energy crises is smashing business and the consumer, pushing the economy into recession and destroying real income. Construction in the UK, and across Europe, is in a state of contraction. According to the latest PMI data, which as a leading economic indicator, this only reaffirms the looming recession. The longer the energy crises continues, the longer and deeper, the recession will be. The GBP fell below 1.2100, following the decision, while the EUR traded up to 1.0240.

The US markets are now focused on the key Non-Farm Payrolls number, set to be released tonight, while Unemployment numbers are heavily camouflaged globally. Pandemic welfare payments across Western Countries disguise the true state of unemployment. The Challenger Jobs report identified a fall in job cuts, but weekly jobless claims ticked slightly higher, ahead of the key jobs report. The recession will impact labour markets and eventually this will be reflected in the economic data.

The AUD pushed back to 0.6970, following some strong trade numbers, while the NZD looks to regain 0.6300. All eyes now turn to the Non-Farm Payroll number, which is expected to add around 250,000 jobs, so any major aberration will impact markets.