Daily Market Commentary 17th May 2022

Markets continued to stabilise, following the rally in the US Friday, with little economic news to drive market direction. The situation in China, regarding COVID lock-downs, is beginning to impact economic data, with the Industrial Production contracting 2.9%, while Retail Sales plunged 11.1%! These lock-downs will begin to impact commodity demand and the associated currencies. The AUD held above 0.6900, with many focused on the Federal Election, which will likely be a cause of some concern due to instability, as a change in government looks increasingly more likely. The real curve ball would be the prospect of a ‘hung parliament’. The NZ market is looking closely at the Budget, to be released his week, which seems to concentrate on the  futuristic green economy. The optics of this ideological priority, largely ignoring the massive cost-of-living crises in he here and now, is bad. The NZD continues to trade below 0.6300 and looks to the reserve for direction, rather than local influence.

Inflation and interest rates continue to dominate global markets, as rising input costs drive runaway inflation. Czech PPI hit 26.6%, as Europe struggles with the energy crises, and the prospect of a food crises. The sanctions levied by the US, Europe and the UK are taking their toll on living standards and driving instability, imposing extreme hardship on their own collective citizenry. The GBP continues to trade below 1.2300, while the EUR pushed back above 1.0400, both struggling under trade pressures. Market focus may turn to the US, with the release of important economic data, in the form of Retail Sales, Industrial and Manufacturing Production.