Weekly Market Commentary commencing 7th December 2020

The ‘Vaccine Rally’ is morphing into a ‘Santa Rally’, as global equities are flooded with liquidity, provided by Central Banks and distribution of the vaccine becomes a reality. The are major caveats that ensure the rally is a nervous one. The virus continues to surge and Governments are shutting down economies. The impact on global economies will be revealed in economic data releases, which may spook market bulls. There are other positives improving market sentiment, with Congressional action of further fiscal stimulus likely, plus a UK/EU trade deal in the offing.

The post Brexit trade deal is imminent, which is likely to boost the GBP, which currently trades 1.3430. The deal may well come before the EU Summit, which is scheduled for next week, which may also bolster the EUR which has traded up to 1.2125. Commodity currencies have been correcting, despite the softer reserve, due to overbought sentiment. The NZD has slipped back to 0.7035, while the AUD drifted to 0.7430, as profit takers move in.

There are major political events likely to impact markets afoot, with the EU/UK trade deal, US fiscal stimulus and possible disruptive transition drama in the USA.