Daily Market Commentary 23rd December 2021

US Equities rallied for the second day running, as risk appetite returned to markets, in what could be the long-awaited ‘Santa Claus Rally’? The improved sentiment has seen the US Dollar retreat, with the EUR surging back to 1.1320, while the GBP jumped to 1.3350. USD GDP growth came in at 2.3% for Q3, better than expected, but well below the previous 6.7%. Importantly the PCE inflation gauge was softer than expected, allowing hopes to kindle of an end to spiralling inflation, forlorn is my guess? PPI in France surged by 17.4%, while Spain saw a blow-out increase of 33.1%! The PPI directly feeds into inflation.

The improved sentiment was a boon for commodity demand and the associated currencies. The AUD roared back above 0.7200, while the NZD broke back above 0.6800. The Bank of Japan released their minutes which confirmed they have the most dovish monetary outlook of the major Central Banks. They will reduce the emergency pandemic assistance but maintain historically soft monetary policy. A return to pre-pandemic relative norms.

Market attention will turn to inflation, with the US full PCE numbers to be released, while hopes are high for a rally for Christmas?