Market Commentary – November 25, 2021

Kevin Jock

25th November 2021

Saved by FOMC meeting minutes as Wall Street recovers from an early session fall to end positive on Thursday. A dovish undertone in the minutes saw Federal Reserve officials taking a step back as many “anticipate that the inflation rate would diminish significantly during 2022” but hedged remarks that “elevated inflation could prove more persistent”. The S&P500 led gains eking out 0.3% whilst both Nasdaq and Dow Jones lagged behind.

Despite a late session risk-on sentiment, unlike their US counterparts, European benchmarks failed to recover losses with the STOXX50 recording its fifth consecutive decline, erasing November gains. Both the DAX30 and CAC40 mirrored similar price action. Prompting further pessimism, the resurgence in coronavirus and unacceptance by a segment of each nations citizen to stomach another lockdown. Ahead of Thanksgiving, mixed start for Asia with Australia falling whilst the Hang Seng and Nikkei stays in positive territory.

Reprieve for Turkish Lira holders after USDTRY snaps back Tuesdays near 20% tumble to settle below the 12.00 level. Nonetheless, turmoil remains rife with President Erdogan intensifying campaigns for lower interest rates in the face double digit surging inflation. Meanwhile, speculators shrugged off the RBNZ 0.25% rate rise to 0.75% with the Kiwi dollar falling over 70 pips to 0.6875 whilst Mexico’s peso accelerated losses to settle above 21.40 following an unexpected central bank nominee by President Obrador. Appointing Rodriguez Ceja instead, of whom little is known of her position on her views of transitory inflation.

Crude prices stay strong around $79, irrespective of President Bidens’ announcement on Tuesday to release large stockpiles in an attempt to drive down cost. Efforts from OPEC members, particularly Saudi Arabia to increase production has thus far fizzled out with the cartel unable to find consensus. Gold stabilizes around 1,787 and bitcoin finds equilibrium above 57,000.

USDMXN-Nov-25-2021-07-50-56-09-AM

Figure 1 (Source: IS Prime) USDMXN Daily : Mexican Peso accelerates losses following surprise nominee pick for central bank governor by President.

Headliner to Review

  • As expected, the RBNZ increased policy rates from 0.50 to 0.75 citing inflation risk. Since encompassing house prices into the central banks assessment, inflation in New Zealand has stayed persistent above target range.
  • Preliminary GDP in the US failed to meet consensus, only growing 2.1% as compared to 2.2% expected. Supply and logistic constraints remain a major factor.

Headliner to Watch

  • ECB President Lagarde due to open at the ECB Legal Conference whilst BOE Governor Bailey due to speak at the Cambridge Union.

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Authors:
Antony Tan
Kerry Man