Daily Market Commentary 20th May 2023

European and US markets were sailing towards a strong close, following a week of strong gains, until the ‘Debt Ceiling Negotiations’ hit a rock and ended with a walk-out. The German DAX index had just reached an all-time record high, while the Japanese equity markets, hit levels not seen since 1990! Confidence and sentiment was riding high, until the Republicans walked out of the DCN on Friday. Markets turned negative, but this was mitigated by the Federal Reserve Chairman, hinting rates may not need to rise much further. The G7 meet in Japan this weekend and enjoy the moment under the ‘rising sun’. The G7 may suggest/propose more sanctions, but this would not be a positive, as the sanctions enacted so far have back-fired on the imposers. The US Dollar settled, allowing the EUR to regain 1.0800, while the GBP bounced back above 1.2400.

Commodity currencies enjoyed the weaker reserve, with the NZD heading back towards 0.6300, while the AUD bounced off 0.6600. The coming week will focus on GDP growth and inflation in Europe and the USA, while the FOMC Minutes will provide key insights into the Fed’s mindset. The RBNZ will announce their latest rate decision and are expected to raise rates another 25 basis points. The RBNZ has been aggressive in its’ confrontation of inflation, and this will need to continue, following the NZ Governments latest fiscally inflationary deficit/debt budget.