Daily Market Commentary 22nd December 2021

US equities recovered some of the recent losses, with a strong rebound overnight. Oil prices bounced back strongly, above US$70/barrel, while the US 10 Year Bond Yields also looked to regain 1.5%. The relief rally was sharp but it will need to build much more momentum to be considered any sort of ‘Santa Claus Rally’. EU Consumer Confidence continued to plunge, into deep negative territory, with the virus threatening restrictions and lockdowns across the continent. The EUR drifted to 1.1250, while the GBP bounced strongly off the 1.3200 barrier.

The RBA minutes were released in domestic trade, which showed the RBA will not consider raising rates unless their is ‘sustainable’ inflation above target levels. This terminology gives them room to move, but they pointed out they may bring forward QE tapering. The latest virus outbreak will not impact the economic recovery, was the Boards opinion, shrouded in caveats. The recovery in demand, allowed the NZD to trade back towards 0.6750, while the AUD consolidates above 0.7100.

Market attention will now turn to growth, as GDP data is released in both the US and UK, while US PCE is also a closely watched number. The PCE is the inflation gauge the Fed closely monitors.