22nd December 2021 - Global markets bounced back overnight with AUD hitting 0.7155 high

Market Headlines

Global markets bounced back overnight on the back of better news related to the omicron variant of COVID-19 which lifted sentiment. South Africa reported a slump in daily infections to the lowest in two weeks. In the UK, where cases continue to rise, Prime Minister Boris Johnson ruled out stricter pandemic rules before Christmas, easing concerns over a potential lockdown. Australian shares are set to continue the rally as global markets recovered from Monday’s sell-off and investors recovered their appetite for risk.

The Reserve Bank of Australia’s first meeting of 2022 shapes as a cliff-hanger with economists split over the fate of the central bank’s bond-buying program, while the Omicron variant only adds to the uncertainty. Eight of 14 economists expect the RBA will scrap quantitative easing at its February 1 meeting, a survey showed. The other six, including Westpac’s Bill Evans, see it scaling back from the current $4 billion weekly pace and ending purchases in May. The RBA, in minutes of its December meeting released on Tuesday, said its current forecasts support tapering. The bank releases updated estimates in February.

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 to curb the Omicron strain. Biden also ruled out new lockdowns or closings. The news out of the US supported a risk on move in both equities and currencies. AUD/USD traded to highs of 0.7140 heading into the NY morning, NZD/USD reached daily highs of 0.6760.

Overnight Currency Range

Currency Pair Low High

AUD/USD 0.7098 0.7155

EUR/USD 1.12605 1.1302

GBP/USD 1.3196 1.3267

USD/JPY 113.55 114.22

NZD/USD 0.6704 0.6765

USD/CAD 1.2912 1.2947

USD/CNH 6.3755 6.3847

AUD/JPY 80.58 81.67

AUD/NZD 1.0552 1.0594

AUD Thoughts

USD was on the backfoot overnight, as risk sentiment took a turn for the better. Commodities charged higher with oil up 3.8%, as US equities trended positively also seeing the Nasdaq gain 2.3%. The antipodeans were amongst the best currency performers on the day, with the AUD to a 0.7155 high and NZD managing 0.6765.

AUD/USD traded higher overnight with the USD under pressure more broadly. Demand remains ahead of 0.71c and again ahead of 0.6995 while offering interest is staggered above 0.72c.

Event Risk Data Today

UK: GDP Q3 forecast at 1.3% (Prior read at 5.5%)

US: Q3 Core PCE along with Nov Chicago Fed Nat Activity Index and Dec Conf Board Consumer Confidence

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