Daily Market Commentary 25th June 2021

The US announced a bi-partisan Infrastructure bill overnight which boosted market confidence. The Nasdaq and S&P both hit record historical highs and wiped off losses attributed to the Fed’s possible ‘tapering’. The Federal Reserve Chair Powell and Treasury Secretary Yellen, had previously recognised inflation as a growing problem and forecast action, into the future. Markets suffered big set-backs last week and both financial leaders have since hurriedly walked back talk of remedial action, dismissing any inflation as ‘transitory’ and ‘self-resolving’.

Equities have regained their mojo along with monetary policy, while further stimulus is added fiscally, compliments of the new ‘Infrastructure’ plan. Bond Yields remain calm and the deficit/debt fuelled spending binge rolls on. The Bank of England recognised inflation as a growing concern, but left interest rates and QE in place. The narrative has changed and action will needed to be brought forward, to address inflationary reality. The GBP drifted lower, to trade 1.3930, while the EUR was steady around 1.1920.

US Weekly Jobless Claims were higher than expected and Durable Goods Orders were lower than expected. The data was largely ignored with the headlines dominated by further fiscal largesse. The Fed will release the annual ‘Bank Stress Test Report’ after the market close today, which is could provide some interest, especially in the detail. The renewed market confidence allowed the reserve to soften and commodity currencies to solidify recent gains. The NZD pushed back to 0.7050, ahead of key trade data releases today, while the AUD pushed up towards 0.7600.