Daily Market Commentary 19th May 2023

Dallas Fed President, Lorie Logan, set the bond market alight, with her hawkish monetary statements overnight. She iterated that current economic data did not support a ‘pause’ in the long list of rate rises, the Fed has implemented. This spiked bond yields and boosted the US Dollar, with the EUR tumbling to 1.0770, while the GBP crashed below 1.2400. A quiet night of economic data releases led the market to focus on Logan’s statement, which also sent equity markets lower. The process for Debt-Ceiling negotiations is now in place so that has been sidelined as an issue. Default is very, very unlikely.

Australian Employment numbers were surprisingly weak, with jobs actually lost and the headline unemployment rate jumping to 3.7%. The unemployment rate is not a very accurate measure of employment in the economy, but the trend is important. This may be the first chink in the armour of an extremely tight labour market, over an extended period of time. The surging reserve forced the AUD back to 0.6600, while the NZD fell to 0.6200. Local markets will look ahead to NZ trade numbers and Japanese inflation data.