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Daily Market Commentary 5th July 2023

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The RBA surprised many by hitting the ‘pause button’ on interest rate hikes. This follows the Fed’s course of action, allowing recent rate hikes to impact the economy, and ‘hope’ inflation is tamed. It is not tamed in Australia, as the people know only too well. Power prices have rocketed up 25% , while food prices have surged nearly 10%, year-on-year. The political pressure on the RBA is immense, with a heavily indebted nation and political leaders affording the high mortgage rates to the Central Bank. The RBA has been too slow, in addressing the inflation crises, and far to politically pliant. That being said, it is the fiscal irresponsibility and the money printing to cover deficit spending that are at the heart of the problem. The pause hit the currency, immediately following the announcement, falling 50 points to 0.6640, but recovered overnight to trade just under 0.6700. The NZ Business Confidence number was another complete disaster, coming in at minus 63, and although slightly better than the previous months disaster (-66), reflects the tough conditions business is operating in. This had little impact on the NZD, which traded around 0.6200, and higher on the cross-rates.

US markets were closed for the Independence Day holiday, so here was little movement in overseas markets. The US Dollar was slightly softer, allowing the GBP to return to 1.2700, while the EUR trades around 1.0900. Markets will be focused on the US labour market in the coming days, with a slew of important reports to be released.

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