Daily Market Commentary 18th May 2022

Global equity markets continued to consolidate, with share markets rallying across Asia, Europe and the USA. US Retail Sales came in stronger than expected, 8.2% annualised, while US Industrial and Manufacturing Production both had sold gains. EU GDP also booked gains, annually growing 5.1%, while inflation remains the elephant in the room. The Bank of England Governor warned of a looming ‘income shock’ about to hit the UK, as the nation faces a crises in the form of both energy and food, which will blow inflation towards 10% and smash citizens standard of living. UK Unemployment hit 3.7%, which was the lowest since 1974, but real wages are being smashed due to inflation. Dire warnings from the Central Bank apply to most of Europe too, but a decline in the US Dollar allowed currency gains. The GBP rallied to 1.2450, while the EUR rallied through 1.0500, supported by strong GDP data (5.1%pa).

The plunging reserve allowed a relief rally in commodity currencies, with the NZD breaking back above 0.6300, while the AUD looks to regain the big figure of 0.7000. RBA minutes revealed the Central Bank was considering greater interest rate hikes in their last meeting, while there are plenty more to come, in an effort to confront spiralling inflation. Markets await the Japanese Tankan report, released today, along with GDP growth data. UK and EU inflation data will also be released tonight, which is expected to be extremely damaging, so market reaction will be telling.