Collinsonfx Daily Market Commentary

Equity markets continued to lose ground, after profit warnings from Apple, post the US President long-weekend holiday. The Apple warnings could be symbolic of the impact of the Coronavirus on companies and markets. Apple warned of severely impacted manufacturing, due to factory closures and dampened demand from consumers, which could be emblematic of other companies and the disruption to markets. The Empire State Manufacturing number blew through expectations, but this failed to curb market fears, forcing US equities and bond yields lower.

The USD rallied, absorbing the negative market news, trading as a safe haven. The EUR tests 1.0800, on the downside, while the GBP slipped back below 1.3000. UK Employment data was steady, but the highly respected ZEW Economic sentiment report out of Germany, witnessed a huge contraction. European markets are suffering, as they seek to battle their way out of severely oppressed markets and barely avoid recession.

The RBA minutes, released during yesterdays trading day, was dovish. The RBA cited weak economic conditions and the impact of the coronavirus, bush fires and drought, as significant risks to the economy. They reminded markets, that there was room for a rate cut to counter these negative pressures, and the main reason for resisting a rate cut was the impact lower rates could have on the housing market. The record low rates have triggered big rises in property prices and massive increases in household debt. It is the household debt that scares the Central Bank, although a housing bubble is not their preferred position. This sent the AUD lower and now trades at key technical support levels, below 0.6700, while the stronger reserve pushed the NZD back to 0.6380.

Markets look very negative and the recent resilience is being tested.