Daily Market Commentary 21st February 2022

It was ‘Quadruple Witching Day’, on the markets Friday, to close out yet another dramatic and volatile week on Wall Street. Equity markets continued to haemorrhage, while market investors and analysts battle with the concept of inflation and the repercussions. Inflation and growth are the key drivers of the economic and political narrative in 2022. Markets this coming week, will be full of measures to indicate the extent of surging inflation and sagging growth. The US will release key GDP growth numbers, this coming Thursday, and the expectations are high. The PCE number is also set to be released, which is the inflation number the Federal Reserve holds dear, and it is expected to confirm rampant inflation.

The negative sentiment infecting equity markets is also breeding uncertainty in the Bond markets. US 10 Year Bond Yields blew through 2%, during the week, but crashed back to 1.92% by the close of trade Friday. The Fed is committed to raising rates, but their enthusiasm and determination, are lacklustre at best. They have been reticent to raise rates, for political purposes and have been dragged, kicking and screaming to the table. A miss on GDP and any resurgent PCE numbers, will force a more aggressive battle plan. The EUR drifted back to 1.1300, while the GBP fell back below 1.3600, despite strong domestic inflationary pressures.

The resurgent reserve forced the AUD back to 0.7170, while the NZD cannot seem to regain 0.6700. The RBNZ meets this week and is expected to raise interest rates, yet again, as the war on inflation continues unabated. The RBNZ, South Korea’s Central Bank and the Bank of England are the only primary Central Banks to declare war, as yet. Key data for the coming week is US GDP and PCE numbers.