STATE OF THE MARKETS

Stocks rallied to key resistance. US stocks continue to rally for the third day, after affirmative reports of Pfizer’s vaccine effectiveness on Omicron. Improved job openings helped fuel the rally that sent Dow (+0.10%), Nasdaq (+0.64%), and S&P (+0.31%) including Russell (+0.80%) to test their key resistance. Hope for a “Santa Rally” sent the 10Y yields back up to 150 basis points while Dollar (DXY) was under pressure at the 96 handle.

In the commodities market, crude continued its upward trajectory to test the $73/bl handle as fears of global lockdown eased. Gold continues to hold bidders at the $1,780/oz mark as investors see inflation report to rise further this Friday. Elsewhere, iron ore jumped to $106.80/tn after reports of China Steel Mills ready to restock for 2022.

In the FX space, Aussie continued to advance in demand across the horizons while Sterling was sent further down the back burner. Euro flipped to demand in the short and medium term accounts as the Dollar eased. Long term sentiments remained unchanged.  On Thursday, markets look for earnings reports from Oracle (ORCL), Broadcom (AVGO), Costco (COST), Lululemon (LULU) and Chewy (CHWY) as well as the latest US unemployment claims.

OUR PICK – GBP/NZD

Doubt over BoE hike will continue to pressure Sterling. Markets continue to doubt BoE’s capability to hike next week as the UK struggles with an energy crisis this winter. New variants and rising cases in Europe saw money markets price 50% probability of a 0.15% hike next week, compared to 70% probability two weeks ago. We see Sterling to be under pressure, especially against high beta currencies when sentiments continue to improve.

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