Daily Market Commentary 16th May 2023

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The European Commission revised their inflation forecasts higher, to 5.8%, for 2023. This was not a surprise, but it does confirm tightening monetary conditions, in the EU. The European Commission also revised the GDP growth projections upwards, for the same period, but this will be difficult to achieve under challenging financial and monetary conditions. EU Industrial Production contracted 4.1% for March and 1.4% for the year.  The Empire State Manufacturing Index collapsed, plunging to minus 31.8, reflecting the dire state of manufacturing in the New York area. The Turkish Presidential elections did not provide a clear winner, so they will go to a run-off, but the incumbent is likely to win, with all the instruments of power at his disposal. The debt ceiling stand-off continues to bubble away, but this will be extended, as political gamesmanship is a tactic in negotiations. The US Dollar surrendered some recent gains, with the EUR rising to 1.0875, while the GBP rebounded to 1.2500.

The softer reserve allowed the recently hammered commodity currencies to regain some ground, with the NZD jumping back above 0.6200, while the AUD looked to regain 0.6700. Australian Building Permits contracted and is lower by 17.2% for the year. Local markets will look at the RBA minutes, to assess the prevailing attitude towards inflation, later in the day.

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