Daily Commentary BY THE CURVE TEAM –

Global Developments Mixed

24th of December, 2020

Heading into Christmas and the New Year global developments dominate the news.

Multiple updates overseas will likely have periphery impacts on Australia. Of most significance to Australia is Chinese demand for our iron ore.

Iron ore the past two days has fallen 8% but remains very high above US$160 a tonne. China has taken other Australian exports to the sword, but given Australia supplies around half of China’s iron ore it is expected to be spared.

Australia’s budget forecasts have iron returning to $55 by the September quarter next year, which appears far too conservative. Chinese demand and fiscal stimulus around the world continue to be strong, so China’s trade policy appears the main downside risk to the price.

The UK and EU appear to have reached an agreement for their trade deal. Fishing had been a sticking point, with the EU demanding at most a 25% reduction in access to waters while Britain was asking for at least 30%.

Knock on effects to Australia will be less explicit. It will reduce new opportunities that may have arisen in the region had no deal been met, but a deal will benefit both economies.

In the US, political instability continues to run rampant, with Donald Trump demanding a higher stimulus bill. Already the US economy is slowing, with spending down 0.4% last month, so a stimulus bill would do much to ramp up the economy.

This concluded Curve’s Daily Commentary for the year. We will resume in the new year on the 4th of January.

Josh Stewart

Associate - Money Markets