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Daily Market Commentary 6th July 2023

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The Fed minutes confirmed that the Fed’s ‘pause’ on interest rate hikes, may be short-lived. The minutes revealed members unanimously agreed to the pause, to evaluate the impact of the long list of rate rises, imposed so far. Inflation remains well-above the 2%  upper target range, so the Central Bank indicated there will be more rate rises, but coming at a ‘slower rate’. This follows hawkish confirmations from the Federal Reserve Chairman Powell, in testimony before Congress and at the latest Central Bankers meeting in Portugal, hosted by the ECB. Equity markets turned negative, on the news, and bond yields spiked. This gave some upward momentum to the US Dollar, pushing the EUR back below 1.0900, while the GBP slipped under 1.2700.

PMI data across Asia and Europe was also very negative. The recessionary pressures are beginning to take toll, slowing economic activity, while labour markets remain tight. Market focus will turn to the US Labour markets, with a slew of Employment data releases due out in the US in the next couple of days, culminating in the Non-Farm Payrolls Friday. The tight labour market must ease before the Fed will even begin to feel they can turn around inflation and monetary policy. The firmer reserve pushed the commodity currencies lower, with the AUD falling to 0.6650, while the NZD dropped back below 0.6200.

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