Daily Commentary BY THE CURVE TEAM –

Calm Ahead of FOMC

24th of May, 2017

Markets were rather calm overnight ahead of the FOMC minutes due out tomorrow morning. Another weak run of data in the US and the release of the full budget papers from the Trump Administration had little impact on the market. Another hike from the FOMC is still a better than even chance when they meet next month, however the minutes could change that.

There is a real data dichotomy starting to become entrenched. US data has been missing estimates for more than a month, which has seen the Citi Surprise index collapse. Meanwhile in Europe, the data has remained strong. This has largely behind the rally in the EUR and softening in the USD, which has helped the AUD recover over the past two weeks.

The FOMC so far has maintained their outlook, reiterating that they see the dip in economic activity as transitory rather than enduring. That is why the market is hanging out for the minutes, so that it can see if there is anything to suggest that the FOMC commitment to their outlook is wavering.

In Australia, the data calendar has been rather quiet over the past week, which is set to change today. Construction work completed for the first quarter will be the first in the run of GDP partial indicators in the lead up to the final release on June 6.

David Flanagan

Director - Interest Rate Markets