Are we going to see another ‘Santa Rally’? December has provided many an opportunity in the past, with the so-called Santa Rally. The RBA left rates unchanged and confirmed that Australia was making a better than expected economic recovery. The RBA Governor did have a caveat, that Unemployment is and will remain, a big challenge. The virus remains a big threat to the economic recovery, with a uncertain return to normal. The AUD drifted back to 0.7350, while the NZD pushed up to 0.7050, supported by stronger global dairy prices.
Rising global economic sentiment was encouraged by stronger then expected Chinese Manufacturing PMI data. This was not replicated in the EU, which suffered flat manufacturing data and negative inflation CPI numbers. The rising economic sentiment allowed the safe-haven USD to decline further, with the EUR surging to 1.2040, while the GBP broke back above 1.3400. The resurgent currencies came, despite no EU/UK trade deal, but markets are strongly anticipating an imminent breakthrough.
The pandemic and vaccine ‘pushes and pulls’ remain in global markets. The local markets will keenly await NZ Terms of Trade numbers (export and import prices) and Australian GDP data. The Australian economic recovery is likely to be reflected in stronger growth numbers, with RBA projecting strong GDP growth in coming years, but still expect a large contraction for the calendar year.