Weekly Market Recap: November 22-26

Key Developments

US Stock markets were out on Thursday because of the Thanksgiving holiday and on Friday they are due for an early close.

WHO's warning on a new Covid variant that has been reported from the African continent ^[1], came to dominate a busy week, as it sparked a risk-off wave that sent investors towards safe-haven assets.

On Wednesday, amidst a large number of economic releases, US Core PCE Inflation surged to 4.1% y/y in October, from 3.7% (revised) in the preceding month.

On the Fed front, minutes from the last policy decision showed that "some participants preferred a somewhat faster pace of reductions that would result in an earlier conclusion to net purchase", while also having more officials in favor of faster tightening, in an increasingly hawkish Fed.

The week of course, had started with US President Biden nominating Mr Powel for another term as Fed Chair.

The Reserve Bank of New Zealand (RBNZ) hiked rates ^[2] for the second time in a row on Wednesday (to 0.75%) and upgraded its projections for the official cash rate ^[3].

President Biden has been quite active this week, as he also released oil from the strategic reserves on Tuesday, in a n effort to combat high gasoline prices, but markets were underwhelmed.

Market Movement

The US Dollar is heading towards another solid week on increasing expectations for faster monetary tightening by the Fed, despite Friday's drop due to Covid fears that undermine those prospects.

The Japanese Yen was the main beneficiary of the Covid fears and USD/JPY was heading towards its worst day in more than a year.

At the time of writing the Eurodollar was trying to avoid another negative week, helping by the greenback demise on Friday.

NZD/USD got a hit from the RBNZ rate hike as it was largely priced in and another one Friday, shedding nearly 3% on the week at the time of writing, as investors turned their back to commodity currencies.

Stock markets took a beating on Friday due to risk aversion, with Wall Street and its major European counterparts heading to a losing week.

USOil also plunged on Friday and was moving towards weekly losses, despite positive reaction to Mr Biden reserve release.

Corporate Activity

The earnings season is now essentially over, after this week's reports from the likes of Zoom (ZM.us) and a handful of other firms, while of note was also the impact of Friday's Covid woes on airlines.

Week Ahead (GMT)

Next week, we will be looking forward to any Fed commentary and how the renewed Covid fears will affect their thinking in the backdrop of recent hawkish rhetoric.

OPEC+ decision on production levels will also be closely watched, in the aftermath of the US Strategic Petroleum Reserve release.

On the data front, we expect a series of PMIs during the second half, preliminary CPI Inflation form Eurozone (Tuesday), Australia's Q3 GDP and of course the always important US Jobs report (Friday).