Major currencies’ summaries for December, 2021
The US dollar seesawed between gains and losses, up during the European session, later down through US trading hours. As traders prepare to close their yearly books, major pairs saw some action for the first time this week.
US consumer confidence dropped to 109.5 in November amid worries about the rising cost of living and pandemic fatigue, but that did not change expectations for stronger economic growth this quarter.
Investors fear that hasty monetary tightening could choke off the rising economic recovery, with little still known about Omicron’s potential to evade current vaccine protection or how deadly it might be.
Despite a relatively large downside miss on November Nonfarm payroll jobs, the big 0.4 per cent fall in the Unemployment Rate to 4.2 per cent was encouraging for the US economy. Data there is going from strength to strength and the markets are expecting a faster pace of tapering and an announcement of the same from this month’s Federal Open Market Committee meeting.
Markets were shaken late last week by news of the new strain of COVID-19, which drove investors to safe haven currencies.
The US published November Producer Price Index, which jumped to a record of 9.6 per cent YoY, much higher than the previous 8.6 per cent. The news spurred risk aversion ahead
of the US Federal Reserve monetary policy decision.
Surprising strength in US consumer confidence also helped ease concerns about a potential slowdown in spending in the world’s largest economy.
Expectations the Federal Reserve could raise interest rates as early as March also aided to the movement in the US dollar.
AUD
The risk-sensitive Aussie dollar languished near a one-year low after Federal Reserve Chair Jerome Powell signalled a faster taper of stimulus despite the risks around the Omicron COVID-19 variant.
Australia’s third quarter GDP rose past 3.0 per cent YoY expectations to 3.9 per cent while the QoQ figures contracted -1.9 per cent. Earlier today, Australia’s Manufacturing PMI jumped past 58.2 figure to 59.2 for November.
The Australia Trade Balance grew past the expected 11B to 11.22B in October.
The details suggest that the Imports shrank whereas Exports improved to -3.0 per cent.
The Aussie and Kiwi dollars continued to benefit from improving global risk sentiments as investors counted on omicron being mild.
Supporting factors being, the recent offbeat trade data from China, along with stimulus steps from Beijing to strengthen the economy and the property sector.
Australia’s NAB sentiment numbers came in mixed for November as their Business Conditions grew from 11 to 12 while the Business Confidence eased to 12 versus 21 prior.
The Aussie trader’s latest indecision could be linked to the mixed data from the biggest customer China and anxiety
ahead of the key Federal Reserve monetary policy meeting.
Australian employment blew past forecasts, adding 366,100 jobs in November, helping to push down the jobless rate to 4.6 per cent from 5.2 per cent.
Australia’s central bank is optimistic the spread of the Omicron variant will not derail an ongoing economic recovery, giving it the option to end quantitative easing early should the run of activity data stay upbeat.
Minutes of the Reserve Bank of Australia’s December 7 policy meeting showed its board remained committed to keeping interest rates at a superlow 0.1 per cent but was considering how and when to wind up its A$4 billion in weekly bond buying.
The Aussie data was upbeat with private credit surging 0.9 per cent in November, the biggest gain since 2007 when the housing market was booming ahead of the global financial crisis
NZD
The New Zealand dollar has actually been weighed down by aggressive hike prospects, with traders expecting that to drag on future growth.
New Zealand economy shrank 3.7 per cent in the third quarter as the economy was hit by an outbreak of the Delta variant of COVID-19. The Kiwi dollar was largely unmoved by the announcement.
JPY
The Bank of Japan is set to keep monetary policy ultra-loose but may
dial back emergency pandemic-funding, less than 48 hours after the US Federal Reserve signalled an imminent end to stimulus as policymakers respond to soaring global inflation.
The Japanese yen, which had been weakening alongside slowed its losses as the worsening virus conditions and firmer signals of the feds earlier rate-hike in 2022 kept the yen buyers hopeful.
GBP & EUR
The pound dropped to a year low after British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in England.
The euro held steady after touching the highest this month when the ECB outlined plans toward removing stimulus over coming quarters, although it also emphasized policy flexibility.
The different paths taken by major central banks underline deep uncertainties about how the fast-spreading Omicron variant will hit economies and about how much each should do to fight surging inflation, which is hitting hard in the United States and Britain, but less so in Europe.
Markets have been largely trading based on changing assessments of the impact of Omicron variant of COVID-19.
Traders are looking forward to the few economic announcements scheduled this week to gauge how the currencies will move after the short break from Christmas.