Daily Market Commentary 9th December 2022

A quiet night on global markets, with little in the way of economic data releases. Markets are already looking ahead to the key Fed and ECB meetings, to be held next week and their respective rate decisions. The Fed is expected to raise rates by a further 50 basis points and the ECB will take the opportunity to follow the leader. The ECB has only just begun to raise rates in this cycle and inflation is much more widespread and pernicious in Europe. The ECB is walking on dangerous ground, by not aggressively attacking inflation, with rates and QT. Energy prices could spike due to winter demand and his would reinvigorate inflationary pressures. The US Dollar continues to soften, with the EUR moving up to 1.0540, while the GBP regained 1.2200.

Asian equity markets continue to recover, with the re-opening of China. Japanese GDP contracted by 0.8% in Q3, in line with expectations, while the BoJ holds fast on extremely stimulative monetary policy. The Australian trade surplus held, but both exports and imports contracted. The weaker reserve allowed the commodity currencies to hold onto recent gains, with the NZD trading up to 0.6350, while the AUD regains 0.6750. All eyes are on on the Fed.