Daily Market Commentary 7th August 2023

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US equity markets stumbled, in the final hour or so of trade, on Friday in the US. Markets were overshadowed all week, by the Fitch downgrade of the US Credit Rating, from AAA to AA+. This was the ‘Black-Swan’ moment of this past week, shocking markets and sending global bond yields spiralling upwards. The Fitch Credit Rating Agency cited the deteriorating US fiscal and monetary situation, and the impact on long term US Debt. The US Treasury attempted to gloss-over the significance of the downgrade, while in conjunction with the media, launched a deny and distract campaign. The US fiscal and monetary situation is approaching a crisis, and this is reflected in their bond markets, while spreading Geo-Political upheaval threatens the US global hegemony. The war in the Ukraine continues unabated, with the US led NATO coalition unable to prosecute any advantage, while the drums of war are sounding across to China and now to Africa. Niger experienced an anti-Colonial Coup d’etat, toppling the pro-US/NATO/France leader. Niger is a major supplier of essential minerals to Europe (including crucial Uranium necessary for nuclear energy production), and any threat to future supply, may lead to a Western military intervention. Geo-Political and economic uncertainty are a serious threat to global markets. The EUR closed out the week trading around 1.1000, while the GBP settled at 1.2750.

Commodity currencies are under pressure from flagging recessionary demand, while still coping with their own fiscal and monetary challenges. The NZD closed out the week below 0.6100, while the AUD dropped back to trade around 0.6550, suffering the impact of negative interest rate differentials. The coming week will be focused on inflation, trade and growth, while keenly watching out for unforeseen economic and Geo-Political events.

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