Daily Market Commentary 26th March 2021

An early rally on European markets was quickly extinguished, as the Federal Chair Powell, spoiled the party with comments regarding future QE. Powell noted the stronger than expected recovery, due to fiscal stimulus and the vaccine roll-out, may allow the reduction in QE measures earlier than expected. Markets baulked at that and turned negative, while Bond Yields held steady, the US Dollar continued to gain ground. The GBP traded 1.3735, while the EUR fell to 1.1770, as delays in the vaccine roll-out and a surging third wave of infections hit home hard.

The final US Q4 GDP number was stronger than expected, coming in at 4.3%, following the massive Q3 of 33.4%. The strong economic recovery has been hastened by the massive fiscal and monetary stimulus and the rise in Bond Yields is reflecting the associated inflationary pressures. The resurgent US Dollar has amplified recent falls in the NZD, which fell back to 0.6950 overnight, while the AUD dropped to 0.7570.

The European Council meeting is underway and may impact markets, as they consider the vaccine roll-out, restrictions on vaccine exports and the economic impact it is having on the economic zone.