Daily Market Commentary 1st May 2023

US equity markets rallied again Friday, following a surge the previous day, triggered by strong earnings from the Tech Giants. The weight of the good news from the tech sector was enough to overwhelm the very ordinary economic data, coming out of Europe and the USA. German and European inflation remains stubbornly high, requiring the ECB to aggressively raise rates, while GDP growth is completely stagnant, at best. German, French and other European Countries GDP growth is magically coming in at zero or 0.1%, thus avoiding the tag of a technical recession. It saves re-defining the measure of a technical recession, as was done in 2022. US PCE inflation also came in stubbornly high, which will only encourage the Fed to raise rates at the FOMC meeting this coming week, along with the ECB. The Dollar was stable and the EUR traded just above 1.1000, while the GBP pushed up to 1.2450.

A slew of poor economic data out of Japan was enough to drive the Yen back to 136.50. Japanese inflation continues to climb to higher levels, while the Bank of Japan holds interest rates negative. Japanese Industrial Production was negative, while Unemployment is also creeping higher. The currency is beginning to tell a story, perhaps? Australian inflation still has a ‘7’ in front of it, and this may encourage a hawkish attitude to monetary policy. Market analysts are predicting ‘no change’ to interest rates at this Tuesday’s meeting, but there may be a surprise, at least in the narrative. The AUD will begin the week around 0.6600, while the NZD heads back towards 0.6200. All eyes are on Central banks this coming week and then will focus on US Employment data.