Daily Commentary BY THE CURVE TEAM –

Uncertainty Continues

15th of February, 2021

Uncertainty continues to be the key theme in the economy.

Despite many economic indicators improving and optimism for containing covid, uncertainty remains. Victoria implementing a 5-day lockdown is evidence of this.

At least for the next few months, containment of the virus will remain a priority for the country. Only when a vaccine is rolled out extensively will containment cease to be a core aim of government.

This short-term uncertainty is not to be undervalued. Confidence levels are rocketing as optimism abounds domestically with covid largely contained and a vaccine on the way.

It is easy to neglect that a downside scenario is possible, which could involve many scenarios. Covid may spread, a vaccine may prove difficult to distribute, consumers may continue to save, among other potential events.

In all likelihood these will not eventuate, but it is a non-zero probability. This was part of the motivation for the RBA’s expansion of their QE program two weeks ago.

The minutes for the February meeting will be released tomorrow. They are not expected to provide anything ground-breaking, given the meeting has since been followed by a speech from Governor Lowe and an appearance in parliament.

Also released this week are employment numbers for January on Thursday and retail sales for January on Friday.

Josh Stewart

Associate - Money Markets