Daily Market Commentary 24th February 2021

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US equity markets continue to feel the pain, especially the Tech-Heavy Nasdaq, which has been heavily battered over the last few sessions. The narrative has changed from the virus/vaccine to growing optimism for the future economic recovery and surging US Bond Yields. The Chairman of the Federal Reserve dented the narrative, with his bi-annual appearance before the US Senate Banking committee. He iterated that inflationary pressures were ‘soft’ and the economic future remained ‘highly uncertain’. This recommitted the Central Bank to the unprecedented monetary policy, that is ‘QE infinity’. This was a relief for equity markets, which rebounded briefly, but the market reality soon resumed the share market slide.

The S&P Case-Shiller Home Price Index jumped, as did US Consumer Confidence, supporting the inflationary story. The EUR drifted to 1.2140, while the GBP approached 1.4100, despite higher Unemployment numbers. Market inflation expectations are looking forward to future economic growth and recovery, embracing the vaccine roll-out, which will drive cost of living pressures upwards.

Commodity prices remain bid and this supports the associated currencies at around recent highs. The AUD trades around 0.7900, while the NZD held 0.7330, ahead of the key RBNZ policy decision today. The RBNZ will be reticent to alter their economic narrative and will resist bullish commentary, ensuring QE remains in place for the foreseeable future.

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