Omicron Uncertainty Remains the Dominant Market Theme
AUD
The AUD advanced higher across most major currency pairs with the NZD being the only exclusion. Asian Equities rebounded with the Nikkei outperforming 2.1% while the Shanghai Comp closed at a a gain of 0.9%. The ASX 200 gained 0.9% to close at 7355 points, this was the best one-day gain in two weeks with 140 companies closing higher. In the event on Tuesday, the minutes of the RBA's last meeting were released but failed to stir a reaction in AUD amid a lack of surprises; the bank continues to support easy monetary policy and is mulling its options for the QE programme in February, which include a potential decision to axe it entirely. Little in the way of local data as we look ahead. In terms of fundamental drivers, Omicron remains the key market theme as participants weigh up how much of an impact its spread is likely to have on the near-term economic outlook and how much would impact the G10 central banks reactions in 2022.
USD
The AUDUSD gained positive traction on Tuesday and snapped two days of the losing streak with the pair trading at a rate of 0.7153 at the time of writing. US Equities rebounded sharply on Tuesday following three days of losses amid fears about the fast-spreading Covid variant. The Dow Jones gained 1.6%, the S&P 500 jumped nearly 1.8% and the Nasdaq outperformed its peers up 2.4% on the close. On Tuesday, The US Q3 Current Account Balance came in at a wider than expected deficit of $214.8 bio. Overnight, President Biden was reported to announce that he would send 500 million free COVID tests to American homes from January and dispatch the military to support hospitals in order to curb the Omicron strain. Biden also ruled out new lockdowns or closings. It’s a quieter day expected today with the Omicron being the key focus for markets along with the upcoming US Final GDP on Thursday.
EUR
The AUDEUR recovered some ground overnight to trade higher, with the pair trading at a rate of 0.6333 this morning. European Equities rallied after the Omicron-induced wobble with both the DAX and the CAC gaining 1.4%. In low-tier data, In Europe, December Consumer Confidence printed at -8.3 as expected though this was down from -6.8. There is little data of note as we head toward the Christmas break. In terms of fundamentals driving markets, the fast-paced Omicron continues to weigh on both currency pairs as the recent macro data fails to provide strong directional bias.
GBP
The AUDGBP followed suit among the pairs to trade marginally higher this morning, trading at a rate of 0.5390 at the time of writing. The FTSE 100 index made a swift recovery from Monday’s turbulent session, with the London Benchmark closing up 1.4%. The latest reports from UK press suggest there will be no new lockdown announcement on Tuesday, though traders will remain on notice for an announcement that could come later in the week. It does seem unlikely that restrictions would be imposed before Christmas. The UK press is speculating this week that a short circuit-breaker lockdown could be imposed as soon as the 27th to prevent the NHS (National healthcare system) from being overwhelmed. A quieter day expected ahead with the final estimate of UK GDP for Q3 being the only data of note.
NZD
The AUDNZD bucked the trend and extended it’s Tuesday losses with the pair trading at a rate of 1.0567 at the time of writing. In low-tier data, New Zealand’s Credit Card Spending improved in November from a revised down -5.2% to -0.1% versus -2.1% market forecast. Further, New Zealand ANZ – Roy Morgan Consumer Confidence (Dec) improved from 97 to 98. And, Fonterra announced the details of their latest dairy auction with the GDT Price Index down by 1.5% while Whole Milk Powder Prices fell by 3.3%. No reaction to the data. Looking forward, Omicron updates will be crucial before the US market opens with the release of the final US Q3 GDP.