NZD USD

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Markets end 2020 in “risk on” mode

Macroeconomic/ geopolitical developments

• Trump finally signed the $900 billion COVID relief bill, a relief for markets.
• The EU-UK trade deal finally got done over the holiday season and was implemented at the end of 2020.
• Europe and the USA are still seeing aggressive increases in the numbers of cases, hospitalisations and deaths from COVID-19, as the new variant first identified in the UK is now being seen around the globe.
• More stringent lockdowns that have been seen in Europe, the UK and in the US through the holiday season are likely to extend into January and likely beyond, with the threat of still more aggressive policies.
• The Pfizer vaccine is being delivered to the global population at various speeds, with the UK due to start delivering the Astra Zeneca/ Oxford University vaccine this coming week.

Global financial market developments

• Global stock indices ended 2020 at or near new cycle peaks and even saw record highs posted by the German DAX and the major US equity averages (the S&P 500, the Dow Jones Industrial Average and Nasdaq).
• The “risk on” phase has continued in the Forex space, which saw the safe haven US Dollar weakening across the FX board.
• “Risk currencies” went still higher as the Australian, New Zealand and Canadian Dollars all strengthened, with the AUDUSD and NZDUSD Forex rates hitting new multi-year highs.
• GBPUSD advanced to a new multi-month high with the EU-UK trade deal done, whilst EURUSD stayed strong, through slightly dipping to end 2020.
• In the commodity space, Gold and Oil were modestly higher to end the year, with Copper sideways, but solid.

Key this week

• Geopolitics:
  • Key this week will be the Georgia Senate runoff elections on Tuesday 5^th January.
  • OPEC+ meets Monday to decide oil production levels
  • The UK is due to start delivering the Astra Zeneca/ Oxford University vaccine this week
  • Markets will monitor further vaccine delivery announcements and approvals.
  • COVID-19 cases, hospitalisations and deaths stay in focus in Europe and the US.
  • Watching for new lockdown measures.
• Central Bank Watch: TheFOMC Meeting Minutes are on Wednesday.
• Macroeconomic data: A very busy data week with the standouts being the global manufacturing and services PMI data Monday and Wednesday respectively, the US ISM manufacturing and services PMI on Tuesday and Thursday, then the US Employment report Friday.

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