Daily Market Commentary 18th June 2021

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The fall-out from the surprisingly hawkish FOMC meeting continued for a second trading day. The Rally in the US Dollar gathered momentum, despite bond yields remaining quiet, driving commodity prices lower. The Fed have finally accepted that inflation is here to stay and is a problem, adjusting their plans to raise rates and brought forward plans to tighten monetary policy. This recognition is a step in the right direction, but more urgency will need to inject itself into their ‘tapering’ to seriously combat the economies mortal enemy.

The rally in the US Dollar pushed commodity prices lower and the associated currencies. The NZD is now testing the Big, Big number of 0.7000, despite much stronger than expected GDP growth data, released yesterday. The AUD plunged below 0.7550, as a function of the rally in the reserve and the hit to commodity prices, this despite huge gains in the Labour market. Australia added 115,000 jobs and the headline Unemployment rate fell to 5.1%, blowing out all predictions.

The FOMC meeting continue to dominate global markets, with equities being tested as interest rate pressure switches to the upside. The GBP crashed to 1.3925, while the EUR fell to 1.1920, despite higher EU CPI inflation numbers. Local Markets will await the Japanese CPI number, to be released today and the reaction from the Bank of Japan.

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