Daily Market Commentary 4th May 2022

The RBA raised interest rates by 25 basis points, the first rise in more than 10 years, and this is not likely to be the last. This follows that shocking CPI number from last week, with inflation jumping from 3.5% to 5.1%, forcing the RBA to act outside norms. The Australian Central Bank is loath to act before a federal election but extra-ordinary times, demand extra-ordinary actions. The decision was still a surprise, despite the call to action, and pushed the AUD  northward. The AUD spiked to above 0.7100, but retreated in overnight trade, while the NZD held above 0.6400.

The FOMC meet tonight and are likely to follow the RBA, raising interest rates, but may chose to bump the rate up by 50 basis points. US Bond Yields have risen sharply, with the 10 year blowing through 3%, increasing pressure on currencies. The EUR has traded around 1.0500, while the GBP looks to regain 1.2500, ahead of he bank of England monetary policy meeting.

The RBNZ release the Financial Stability Report today, along with a press conference, while key important employment data is also released. Inflation remains a key driver of market direction.