Weekly Market Recap: December 06-10

Key Developments

The week started with optimism around Omicron's severity, with Dr Faucci saying on Tuesday that "it appears that with the cases that are seen, we are not seeing a very severe profile of disease" [1], while Pfizer and BioNTech said a day later, that their vaccine could neutralize the Omicron variant (B.1.1.529 lineage) - according to preliminary laboratory studies [2].

The United Kingdom on the other hand, announced stricter Covid-19 rules to combat the spread of the new variant on Wednesday [3], while the Director General of the World Health Organization (WHO), Dr Tedros, warned that Omicron "could have a major impact on the course of the pandemic" [4].

Helpful to sentiment, was also the reduction of the Required Reserve Ratio (RRR) for financial institutions from the People's Bank of China's (PBPOC) by 0.5%, to be implemented on December 15. [5]. The country's property market though, continued to be a source of risk aversion as Fitch Ratings downgraded Evergrande and Kaisa to Restricted Default on Thursday [6], [7].

The Reserve Bank of Australia (RBA) kept rates at 0.1% and QE at $4 billion a week until at least mid-February 2022 [8], while the Bank of Canada (BoC) did not offer any surprises either, by maintaining rates at 0.25% [9].

On Friday, US CPI Inflation surged 6.8% y/y in November - the highest level since 1982 –and Core CPI rose to 4.9% y/y. Monthly figures eased to 0.8% and 0.5% respectively.

Market Movements

US Dollar's kneejerk reaction to CPI data was lower, but at the time of witting, it was heading towards a profitable week against the Euro, the British Pound and the Japanese Yen.

Main Commodity Currencies (AUD, NZD, CAD) on the other hand, were heading towards gains against the greenback due to improved sentiment.

Wall Street returned to profits, helped by optimism regarding Omicron's severity, despite faster tightening prospects by the Fed. Similar mood carried main European markets higher, with the GER30 having posted its best day of the year on Tuesday.

USOil was looking set on ending its six-week losing streak, whereas XAU/USD was mixed.

Corporate Activity

Some of this week's highlights include Lucid's SEC subpoena, Amazon's fine by Italian regulators, BMW's semiconductor supply deal, Visa's Crypto Advisory service and more.

Week Ahead (GMT)

The US Federal Reserve dominates the upcoming week, as it hands down its monetary policy decision on Wednesday, along with updated staff projection. The meeting comes in a backdrop of increasingly hawkish commentary and calls faster QE tapering.

On Thursday, the spotlight falls on the Bank of England (BoE) which had wrong-footed markets with its previous decision to not hike rates and the European Central Bank (ECB) which has been pushing a dovish message. Bank of Japan (BoJ) follows on Friday.

Other than that, we will be expecting CPI Inflation figures from the UK, Canada (Wednesday) and Eurozone (Friday), Retail Sales from USA, China (Wednesday) and UK (Friday), as well as a series of preliminary PMIs on Thursday. New Zealand will also draw attention with Q3 GDP (Wednesday) and Australia with the Employment report (Thursday).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 10 Dec 2021 https://www.whitehouse.gov/briefing-room/press-briefings/2021/12/07/press-briefing-by-white-house-covid-19-response-team-and-public-health-official-2/

2

Retrieved 10 Dec 2021 https://www.pfizer.com/news/press-release/press-release-detail/pfizer-and-biontech-provide-update-omicron-variant

3

Retrieved 10 Dec 2021 https://www.gov.uk/government/news/prime-minister-confirms-move-to-plan-b-in-england

4

Retrieved 10 Dec 2021 https://twitter.com/i/broadcasts/1yoJMWgvbMpKQ

5

Retrieved 10 Dec 2021 http://www.pbc.gov.cn/en/3688110/3688172/4157443/4408001/index.html

6

Retrieved 10 Dec 2021 https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-evergrande-subsidiaries-hengda-tianji-to-restricted-default-09-12-2021

7

Retrieved 10 Dec 2021 https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-evergrande-subsidiaries-hengda-tianji-to-restricted-default-09-12-2021

8

Retrieved 10 Dec 2021 https://www.rba.gov.au/media-releases/2021/mr-21-29.html

9

Retrieved 25 Jun 2022 https://www.bankofcanada.ca/2021/12/fad-press-release-2021-12-08/

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