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Collinson FX: Collinson FX: December 29 - More helicopter money

by Collinson FX 29 Dec 2020 10:21 NZDT 29 December 2020
Fully loaded - America's Cup World Series - December 2020 © Richard Gladwell / Sail-World.com

Collinson FX: December 29 - More helicopter money

Markets experienced a post-Christmas rally on the back of President Trump signing the enormous bailout package. This was combined with another Government funding bill, to total over USD$2.3 Trillion! This is in addition to further legislation promised for bailout money of up to USD$2,000 per person. The helicopter money is coming thick and fast. Markets appreciated the fiscal stimulus and equities rallied strongly.

The EUR jumped back above 1.2200, while the GBP crashed back to 1.3450, from the highs pre-Christmas. The EU/UK post-Brexit trade deal sparked a spike in the GBP, following the announcement just prior to Christmas, but the reality was not enough to support the currency. It appears to be a great deal, although there remains criticisms, although it should enable the UK to open up massive potential trade deals across the globe. The British Government have already signed many and now look to the mother of all deals, the USA.

The coronavirus remains an issue, as lockdowns continue across Europe and parts of the US. Political events will come into focus over the next month as the US moves into a transition, to the new administration. This will not be a smooth handover and it may well have implications for markets.

Collinson FX: December 28 - Brexit deal finally agreed

A post-Brexit Trade Deal between the UK and EU was finally agreed, at the 'eleventh hour', as expected. It appears to be a great deal and compromise on the 'fishing issue', has allowed an agreement to be made. The devil will be in the detail. The GBP surged on the news, jumping above 1.3600, while the EUR was steady at 1.2180. The UK has signed numerous deals globally, with the US/UK deal now green-lighted, which will be the mother of all trade deals. The flexibility that a free and independent Britain has now, will facilitate a surge in global trade, away from the insular, inwardly focused EU.

US Markets rallied into Christmas but the anticipated 'Santa Rally' was not forthcoming. The surge in virus cases across Europe and the US has seem massive disruptions and lock-downs. This will massively impact global economies and markets well into 2021. The Christmas/New Year period will be low volume and quiet across global markets. The AUD is attempting to regain 0.7600, while the NZD is trading around 0.7100. The fortunes of the commodity based, trade exposed currencies, remains very dependent on global markets and extremely vulnerable.

The Chinese attempts at trade sanctions have particularly impacted Australia, but signs of self-harm are coming to the fore. China is said to be suffering power shortages from the lack of Australian coal and Australia could further damage the Chinese economy with Iron ore supply, supported by allied trading/political partners?

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