Daily Market Commentary 24th January 2023

Asian markets were quiet, as Chinese celebrate New Year and holiday for a week. The Bank of Japan released the minutes from their last meeting, which provided unusual activities, which surrounded the adjustment to Bond Yield trading. The Bank of Japan retained their record low interest rates and historical easy monetary policy, but made an adjustment to bond yields, allowing them to rise. The surprise was, that Government Ministers attending the meeting, were also surprised and had requested an adjournment during the meeting. It is small adjustment in monetary policy but may be a signal the Bank is worried about inflation? US equities rallied strongly, following comments from Federal Reserve Bank Governor Waller, suggesting the next interest rate rise may only be 25 basis points. The ‘peak inflation’ narrative, is being reinforced by a new ‘peak interest rate narrative’. The softer US Dollar, allowed the EUR to trade up to 1.0870, while the Yen fell back to 130.60.

The weaker reserve also allowed the commodity currencies to book gains, with the AUD breaking above the key 0.7000 level, while the NZD pushed back up above 0.6450. Chinese New Year celebrations mean quiet Asian trade, but markets will focus in on flash PMI data from Japan, Australia and Europe.