US equity markets continue to operate at near record levels, following a big surge in confidence, once the US election was in the rear-view mirror. Certainty breeds confidence, although policies have been telegraphed, they still need delivery. Economic data out of Europe and the US remains weak, which will only improve, once the new administration is fully ensconced. The Philly Fed Manufacturing and the Kansas City Manufacturing Activity reports remained deeply negative and now markets will look ahead to PMI data, set to be released tonight. Asian and European PMI data will unfold in today’s trade. German GDP is expected to finally move into positive territory for Q3, moving the fallen State, out of an extended technical recession. Germanys problems remain, with energy at the heart of the problem and an early election called, after the fall of yet another incumbent European Government. The US Dollar regained upwards momentum, with the EUR slipping back to 1.0500, while the GBP tumbled towards 1.2600.
The rising reserve punished commodity currencies, with the NZD falling back to 0.5850, while the AUD trades around 0.6500. The AUD has some resistance due to the RBA’s reassertion that they will keep rates high until inflation is broken. The Governor is waiting for 2 consecutive falls in inflation, before they consider rate cuts, which will not happen until next year at the earliest.
