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Daily Market Commentary 22nd May 2024

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Markets await weaker inflation and Central Bank rate cuts, while bond yields stutter and equity markets look for further reason to rally to new record highs. The ECB is set to lead the way, with rate cuts in the veery near future, while the Fed debates whether to hit the button, or not. German PPI numbers came in negative, in support of the input inflation narrative being done. Canadian CPI inflation data was static, coming in at an annualised 2.7%, looking to follow other Central Banks with rate cuts. The EUR pushed back up to 1.0850, while the GBP held 1.2700, ahead of key inflation data releases tonight.

The RBA minutes were released yesterday and confirmed hawkish sentiment, revealing the Central Bank was considering rate hikes, rather than cuts. The Australian Central Bank is in a predicament, as the Government is blindly increasing fiscal largesse, damaging any hope the Central Bank has to squash inflationary pressures. The Banks quandary has not impacted the currency, with the AUD trading around 0.6650, while the NZD fell back below 0.6100. The RBNZ is expected to leave rates unchanged, ahead of today’s interest rate decision, while the narrative will probably remain hawkish.

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