Daily Market Commentary 5th July 2022

US markets were closed for the Independence Day holiday, so global markets were quiet, to open the week. The economic number that stood out was the release of German Trade. Germany experienced the first trade deficit (EUR$1 Billion) in almost 31 years, citing soaring input costs and supply chain issues. This is a canary in the coalmine for Europe, as Germany is the engine-room of an extremely vulnerable European economy. European PPI spikes to 36.3%, as energy prices drive across the board price/input increases, resulting in plummeting cost-of-living standards for European citizens. Turkish inflation was a mind-boggling 78.6%, as the Erdogan regime adopts another version of modern monetary theory. Low interest rates and pro-growth, ignoring inflation and the collapse of the currency. It does not appear to be working too well?

The ECB’s new monetary expansionism, through manipulation of bond purchases among member States, has tweaked yields. The EUR fell back to 1.0420, amidst all the confusion in the bond markets, while the GBP looked to regain 1.2100. Commodity currencies stabilised, with the AUD trading 0.6850, while the NZD attempts to hold 0.6200. NZ Business Confidence data, set to be released today, will not add to momentum as expectations remain low. US markets re-open tonight and close attention will also be paid to the RBA.