Daily Market Commentary 24th May 2023

Markets are being dominated by the ongoing debt ceiling negotiations in the US. The negotiations are apparently progressing well, but so far, no compromise has been reached and time is running out. There will be a deal, but first we must have suffer brinkmanship and markets will react accordingly to the compromise. European flash PMI was strong, in the services sector, but manufacturing is suffering terribly under the conditions. Higher energy prices and depressed demand are taking their toll on manufacturing, especially in Germany, the engine room of Europe. The Richmond Fed Manufacturing Index also points to severe pressure in the manufacturing sector, contracting at minus 15, while US flash manufacturing PMI also remained in contraction mode. The US Dollar rallied, with the EUR slipping below 1.0800, while the GBP drifted back to 1.2400.

The rising reserve drove the commodity currencies lower, with the AUD testing the downside of 0.6600, while the NZD fell below 0.6250. Local market attention will be focused on the RBNZ and their latest interest rate decision. It is hard to see the RBNZ taking a backward step, as inflation remains robust and the latest deficit/debt budget, in NZ, will only add to inflationary pressures. The Japanese Tankan report will also be released today, while international attention remains firmly focused on the ‘Debt Ceiling Negotiations’.