Daily Market Commentary 17th December 2021

Markets were dominated by Central Bank action and monetary policy. The Fed acted to taper QE quicker than previously indicated and begin to raise interest rates in the New Year. The Bank of England went one better and raised rates, recognising the freight train coming down the track, that is inflation. The ECB also indicated an increase in tapering and interest rate rises for the New Year. This horse has already bolted. The Fed are acting on inflation that is at 39 year highs and PPI fast approaching 10%! The Bank of England recognised the serious nature of the problem, brushing aside the excuse of virus mutations, while the ECB has no fear of growth, so acted accordingly. The USD was weaker, with the EUR regaining 1.1300, while the GBP was boosted by the BofE action, jumping above 1.3300.

Australian employment numbers were stronger than expected, as the economy re-opens following the debilitating lockdowns. Headline Unemployment fell to 4.6%, despite a rise in participation, while PMI data was soft. The AUD rallied back to 0.7180, while the NZD looked to regain 0.6800, both benefiting the weaker reserve.

Market will now await the Bank of Japan decision today, with no high expectations, despite the bullish trade numbers released yesterday.