Santa Claus Rally a Lost Hope in 2021
AUD
The AUD was generally weaker overnight with broad risk-off sentiment from Omicron weighing in on currency markets. As health conditions deteriorate globally, equity markets have weakened with Asian Indices suffering on Monday. The Nikkei was the worst performer down -2.1%, ASX was -0.2% lower on the close, reversing its recent gains, led by falls in energy and financial stocks. Todays Aussie Monetary Policy Meeting Minutes could provide more detail on the RBA’s Bond Purchasing Program, although Governor Lowe already gave a fair indication of the future pathway and the conditions required to be met to achieve the pathway. It seems to be a fairly consensus view now that the RBA will completely axe its QE programme in February in wake of last week’s much stronger than expected Australia November labour market report. The timing of rate hike is also a key theme, with markets expecting the RBA at some point to indicate that a first post-pandemic hike might come as soon as 2022 rather than the current 2023 guidance. Apart from the aforementioned Meeting Minutes, it’s slim pickings for Aussie data in the lead-up to Christmas.
USD
The AUDUSD trading lower although with in subdued conditions as we lead up to the end of the year, trading at 0.7107 this morning. Wall Street was also on the back-foot with the leading 3 indices falling, the Nasdaq losing -1.3%, whilst both the Dow Jones and S&P 500 lost -1.5%. The US posted a stronger Leading Index, improving by +1.1% in comparisons to expectations of +0.9%, though there was little reaction to the data. Nothing notable on the calendar for the US until we see the Fed’s preferred gauge for inflation, the Core PCE Price Index which should be released Friday morning.
EUR
The AUDEUR also trading lower as it sits at 0.6301 this morning. European equities were weaker with the with Euro Stoxx 50 down -1.4%. The Euro was stronger despite large parts of Europe feeling the heat of Omicron, with Europe’s biggest countries introducing more curbs to fight the surges in Covid-19 infections as the highly-transmissible Omicron variant slams already weary populations. Germany, which is reported to be at 67% of the peak of its infection curve, designated the UK as a virus variant area from Monday, the highest risk category.
GBP
The AUDGBP has managed to remain at steady levels, with risk sentiment weighing in on the Brits as the pair travels at 0.5381 this morning. As Omicron cases surge in the UK, the country faces the politically perilous decision of whether to tighten restrictions. Total Covid infections rose by about 50% in a week to touch a record 93,000 on Friday. However, on the day where the UK reported its second-highest daily covid tally, the UK's PM Boris Johnson says that there will be no new restrictions in England for now. On the other hand, he said that ''we have to reserve the possibility of taking further action on covid.''
NZD
The AUDNZD has managed to push slightly higher, currently sitting at 1.0588 this morning. The pair is trading at highs not seen since mid-October, with risk-sentiment also weighing in on the Kiwis. Looking forward, New Zealand’s Credit Card Spending for November, expected -2.1% YoY versus -5.6% prior, will entertain currency markets but major attention will be given to risk catalysts for clear direction.