Daily Market Commentary 8th June 2023

European and US equity markets are directionless and continue to meander between gains and losses. There are no major data releases that appear to impact market greatly. Bond yields in both Europe and the US are creeping higher, as Central Banks continue to combat stubborn inflation. An OECD report on inflation confirms elevated levels of inflation in Europe will continue and the leader of the pack, remains the UK. The ECB has confirmed they will continue to raise rates, which is essential, as they are way behind on that yield curve. The UK has a real problem, bordering on crises, with inflation. The Bank of England has been aggressive in raising rates, to tame the highest inflation in the advanced world, but cannot contain it due to their expanding balance sheet and profligate fiscal deficit/debt spending by the Government. Trade numbers from Europe and the US are reflecting the fall in demand and recessionary pressures. The latest numbers released were from France and the US and confirm rising trade deficits and exports crashing, while imports remain stubbornly higher. The EUR trades around 1.0700, looking for direction, while the GBP continues to trade above 1.2400.

Chinese trade data was extremely disappointing, with big falls in the headline trade surplus, reflecting falls in both exports and imports. The demand side of the equation is the problem, with the European recession impacting directly. This is not great news for commodity currencies, which headed south, despite a weaker global reserve. The AUD slipped back below 0.6650, while the NZD tumbled back towards the ‘BIG’ figure of 0.6000. Trade data is a worrying confirmation of recessionary pressures hitting demand, while inflation and rising interest rates smash the consumer.