Collinsonfx Daily Market Commentary

Daily Market Commentary

Economies across the world continue the re-opening process, which has triggered optimism and inspired markets to rally strongly. The 'V Shaped' recovery is on but with caveats. The threats to the recovery are many and headlined by a second wave of the virus, which could be more likely in the USA, after the massive protests across many of their cities. The protests have spiraled out of control and degenerated into riots and looting. This is both a threat to civil order and the to the re-transmission of the virus? The other major threats to markets recovering is the Chinese situation.

The Chinese relationship with the West, remains precarious, as the trade relationship comes under the spotlight. Supply chain security, the genesis of the virus and now their aggressive actions towards Hong Kong, Taiwan etc.. President Trump has imposed sanctions, but is yet to suspend the hugely important, trade agreement. Markets confidence has driven the US Dollar lower, with the EUR rising to 1.1165, while the GBP jumped to 1.2540.

The RBA left rates unchanged and stood ready to activate further Bond purchases, if the credit market deteriorates further. They observed that the economy is going through a very difficult period and experiencing the 'biggest economic contraction since the 1930's'! The re-open is underway and further monetary and fiscal stimulus will be needed on the road to recovery. This has built momentum in the surging commodity currencies, with the AUD rallying up to 0.6870, while the NZD has surged to 0.6350.

It is hard to see the rally continue unabated, while these pressures build and stocks remain over-bought and inflated.