Daily Market Commentary 23rd November

This is a shortened trading week in the US, as their Thanksgiving holidays close markets on Thursday, so an extended long weekend can be expected. Markets were dominated by news that the Federal Reserve Chairman, Jerome Powell, has been reappointed for another term. This was greeted with enthusiasm by markets, with equities rallying strongly, along with Bond Yields and the US Dollar. The GBP crashed below 1.3400, while the EUR fell back to 1.1240, after extremely negative consumer confidence data was released. The Eurozone is in a mess, once again, with higher than ever virus infection rates, despite high vaccine rates? This has lead to further political restraints on peoples movements, with lock-downs and other restrictions across Europe.

The re-appointment of Powell was greeted by markets despite the track record. He has ruled over the biggest expansion of the Fed’s balance sheet in history, thus by his actions, promoting ‘modern monetary theory’. The extreme policies have lead to record low interest rates, for an extended period and the employment of debt monetisation. The rally can probably be put down to the fact that he was preferable to the other leading contender, Brainard. Commodity currencies were victims of the stronger reserve, with the AUD falling to 0.7220, while the NZD crashed to 0.6950.

The RBNZ is likely to raise rates, once again, when they meet tomorrow. The Governor has been following the lead of other Central Banks, in addressing the latest crises, but has awoken from his monetary slumber and recognised the prospect of runaway inflation. He is attempting to nip inflation in the bud. This can only be supported and perhaps other Central Banks may follow?