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Global market watch - 2nd December 2021

The UK economy got a vote of confidence from the Organisation for Economic Co-operation and Development yesterday. Their forecasts suggested that the UK is headed for the best growth of G7 nations for 2021 and 2022. They did urge caution however, as they noted that the economy could face hurdles, particularly around the supply chain and labour shortages. The pound took these positive comments on board and squeezed higher yesterday. However, later in the evening the FT published a report stating that the US would not agree a trade deal with the UK as they feared PM Johnson triggering Article.

The single currency traded quietly yesterday as manufacturing PMI data releases were broadly as expected. Investors are now waiting for the important non-farm payrolls release on Friday. Which is expected to show a gain of 553k new jobs for November.

The market was still considering Fed Chair Powell’s plans for speeding up the taper and what that would mean as far as timing when the first US rate hike will come. Fed Chair Powell and Treasury Secretary Yellen testified again yesterday, although this left the market less disturbed than yesterday. Jay Powell did say that that the risk of higher inflation has clearly risen and that inflation has spread more broadly, but that was about all that he said of interest to the market. This left the market adopting a slightly bearish attitude towards the dollar and waiting for additional news on the Omicron variant. Unemployment claims may be of interest today.

The AUD managed to capitalise a touch on the US dollar weakness as it waited for the important US data on Friday. Overnight retail sales and trade balance data were both released pretty much as expected growing by 4.9% and registering an AUD 11.22 billion surplus respectively.

The oil market steadied after Tuesday’s 4% decline and as such supported the loonie.

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