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No need to worry

The major economic news over the past 24 hours has seen, at most, incremental change to the outlook for economic growth and interest rates. This will allow investors to concentrate on positive expectations for the upcoming reporting season and should see the ASX 200 index build on yesterday’s rally off chart support around 5990.

The Fed statement expressed a little more confidence that inflation will rise gradually in the near term. If they are correct in this, there will be at least three rate hikes this year, barring unforeseen risk events. While a little less positive, Australian CPI data did little to move the dial on expectations for RBA policy. At the same time, China’s manufacturing PMI remains within the moderate growth range it has now been in for 18 month.

The net effect of this news was to leave long bond yields largely unchanged and allowed stock markets to settle. Concerns over potential disruption from Amazon put pressure on US health stocks. Were it not for this headwind, US indices would have had a more positive session.

The incremental shifts in outlook from the latest macro news has however been sufficient to see the Aussie Dollar fade from chart resistance.  A combination of a little more certainty about Fed rate hikes, a little less certainty about RBA policy and a marginal weakening in China’s manufacturing PMI was not the mix necessary to provide buyers with the confidence to push the Aussie past previous highs at .8125.

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