Daily Market Commentary 18th May 2023

US market sentiment turned positive overnight, with growing optimism that the debt ceiling will be raised and a deal done. A process of negotiation is now in place, between the Republican led Congress and the President, so they can now move forward. This allowed equity markets to rally back, to wipe out yesterday’s losses and settle bond and currency markets. EU inflation rose slightly to 7%, which is going in the wrong direction and ensures more ECB rate rises and tight monetary conditions. US Building Permits contracted 1.9%, while Housing Starts rose 2.2%, in a leading sector that has been very depressed. The EUR drifted below 1.0850, while the GBP remains trading below 1.2500.

Commodity currencies were steady, with the NZD consolidating above 0.6200, while the AUD settled above 0.6650. Japanese Q1 came in at a better than expected 0.4%, up from the flatline of zero, in the previous Q4 period and avoiding a technical recession. Fears of a global recession appear to be waning, while the Japanese Industrial Production contracted 0.6%, consumer demand remains under pressure. Local markets will follow Australian Employment data, Japanese Trade numbers and NZ PPI inflation data.