Daily Market Commentary 19th May 2021

Market were flat overnight, with little movement in equities, while the US Dollar drifted lower. UK Employment data confirmed the improvement in the economy, with the headline Unemployment rate falling to 4.8%, while EU annual GDP improved to a contraction of 1.8%. The GBP surged to trade 1.4200, while the EUR pushed up to 1.2220, sparked by the stronger economic data. US Housing Starts surprised markets, contracting 9.5%, which would be a major concern if the trend extends beyond one month.

The RBA minutes were upbeat regarding the economic recovery in Australian and in the Asia/Pacific region. The Central Bank reiterated that low interest rates would remain until 2024, unless inflation blew through the target range. They repeated the Fed assertions that the spike in CPI/inflation was temporary in nature and would settle. Time will tell!? Modern Monetary Policy will be tested by inflation. The AUD rallied on the news, rising to 0.7800, while the NZD traded up to 0.7250. Global Dairy prices drifted lower, but the soft reserve allowed the currency to consolidate gains.

Markets will watch the release of the Fed Minutes today and growth and inflation data.