NAB – The Morning Call · Independence Day: Recession Resurgence

Independence Day: Recession Resurgence

Monday 4th July 2022

Recessions fears continue to rise, pushing bond yields lower. As NAB’s Rodrigo Catril explains, the US ISM manufacturing report on Friday added to the fears, showing a contraction in new orders. It’s no longer an issue of supply constraints, demand is also softening. Yet inflation continues to rise. In Europe it grew from 8.1% year on year in May, to 8.6% in June. A big fall in copper prices also suggests an expected fall in demand. All this uncertainty is knocking the Aussie dollar down more than most currencies. This environment provides the ammunition for the RBA to make a large hike (50 basis points) tomorrow. Later in the week we’ll see if the tight labour market in the US is easing, if at all, with the release of the monthly non-farm payrolls data. Prepare for a bumpy week again.

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