Daily Market Commentary 31st December 2021

The ‘Santa Claus Rally’, in equities, continues unabated. The US share markets are trading up towards historical highs and have booked substantial gains for the 2021 year. The rise is not due to massive economic prosperity, but rather the opposite, the continued reaction of Central Banks to the pandemic. Fiscal stimulation has driven monetary stimulus, to an unprecedented level. This is despite the blowout in historical monetary expansionism, for the last 20 years. The GFC triggered a surge in monetary largesse and debt, never seen before and this latest rendition is on steroids. The Federal Reserve has printed a third more US Dollars than existed pre-pandemic, in an epic expansion of money supply and debt. Inflation has been exploding throughout the USA and will be the only brake on the madness of ‘modern monetary theory’.

The Chicago PMI number was stronger than expected, as virus cases continued to surge, but markets are confident in the fading virulence of the latest mutation. The US Dollar was steady, despite a drift in the US Bond Yields, ahead of the final day of trade for 2021. The GBP looked to push to 1.3500, following strong local House Price data, while the Yen fell back to 115.15.

Commodity currencies were steady, with the AUD consolidating above 0.7200, while the NZD also look to live above 0.6800. China PMI data will be released today, but there will be little further economic indicators to break the final rally for the year.