Friday January 20th 2023

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There was a strong response to the lower-than-expected employment numbers yesterday, with 10 year bond yields falling more than 20 basis points. NAB’s Ken Crompton says this was an overreaction, because unemployment remains low and it won’t allay any of the RBA’s concerns about the tightness of the labour market, or encourage them to change their path on rate rises. No change was also the message from the ECB, reinforced by the minutes of the last meeting, and a speech at Davos by Christine Lagarde. There’s been little market reaction to the US debt ceiling. We’ve been here before and know that Republicans will use it as leverage against the BIden government, but all will be sorted by June. Today Japan’s CPI will reinforce the need for the BoJ to change policy direction at some point.

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