Key Points From This Week
Fed Extends Asset Purchases
The US Dollar was heavily sold this week as the Fed reaffirmed its commitment to maintaining highly accommodative monetary policy for as long as necessary. The Fed said that it will continue monthly asset purchases of $120 billion until the economy has made a substantial recovery and reiterated its guidance that rates will remain on hold until at least 2023.
BOE Holds Rates Steady
The BOE held rates unchanged this month. The bank struck a more optimistic tone saying that recent activity had been stronger than expected, adding that COVID vaccinations were reducing the downside risks to the economy over the medium term though did say that uncertainty remains, especially with regard to the ongoing Brexit talks.
SNB Reaffirms Easing Stance
Despite accusations of being labelled a currency manipulator, the SNB maintained rate son hold at -0.75% (lowest in the world) and reaffirmed its commitment to buying foreign currencies as much as necessary in order to prevent excessive strengthening of the franc.
Strong US, UK, EZ PMIs
The latest set of PMIs were much stronger than expected, confirming an ongoing recovery across the three economies despite the return of lockdowns over the last month. While service sector PMIs were still seen lagging, manufacturing stormed ahead offering plenty of hope for the industrial landscape
COVID Vaccinations Continue
Vaccinations are now underway in the UK, US and Canada following the approval of the Pfizer vaccine. With further vaccines awaiting regulatory approval and other nations due to begin vaccinations shortly, there is a high level of optimism in the market which is helping lift risk assets into the end of the year.
Key Events Next Week
There are no tier one economic releases due next week and with the Christmas holidays falling at the end of next week, flows are expected to be light. The current theme of USD weakness is likely to extend, albeit with a reduced momentum over the week.
Keep An Eye On
With trade talks between the EU and the UK headed into their final weeks, the pressure is on. Both sides continue to fluctuate their view around whether or not a deal can be made suggesting that there is a very slim chance a deal can still be agreed. Trade talk headlines are likely to be the main market move next week.
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