Daily Market Commentary 12th February 2021

The Federal Reserve Chairman had warnings for the US economy and in particular the challenges facing the Labour market. He reiterated that the markets would require continued fiscal and monetary support, so we cannot expect any changes to monetary policy and for low interest rates to continue for an extended period. The rally in equities has its genesis in monetary policy but is heavily dependent on the vaccine, as an antidote to the lock-downs and economic destruction, wreaked up global economies. That seems pie-in-the-sky. The Dollar managed to regain some lost ground, as equities slipped and pushed the EUR back to 1.2120, while the GBP slipped to 1.3810.

The resurgent Dollar had little impact on the commodity currencies, with the AUD pushing above 0.7750, while the NZD crept up to 0.7230. Australian inflation data was continuing to reflect rising demand in the economy, with the ‘Consumer Inflation Expectations’ rising to 3.7%. The inflation number has recently been considered a positive, reflecting economic growth, but it remains a measure of cost and prices which are rising dramatically. The cost of living pressures will be felt by the consumer and thus the economy, although it has been depressed in statistics.

A slow week of economic data releases has allowed a more macro reflection of the economy, virus lock-downs and vaccine roll-outs.