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Collinson FX: May 5, 2020 - Going through the Lockdown Gears

by Collinson FX 4 May 22:39 PDT 1 May 2020
From the pre-Social distancing World - Post Regatta Prizegiving - 2020 Mahurangi Regatta - Mahurangi Cruising Club - January 25, 2020 © Richard Gladwell / Sail-World.com

Collinson FX: May 15 2020 - Going through the Lockdown Gears

'Sell in May, go away' appears to be holding true, despite a strong rally in April, as Western economies return to work. The coronavirus has taken its toll on the global economy and many are looking to apportion blame. China has been recognised as the genesis of the pandemic and it looks as though repercussions may include trade sanctions. The global economy does not need further disruptions to trade and dislocation of the existing supply chain. The EUR managed to regain 1.0900, while the GBP traded 1.2425, as the region moves past the peak virus impact.

Rising trade tensions threaten the trade exposed commodity currencies, as retaliation towards China may include tariffs. The AUD has fallen back to 0.6420, while the NZD holds 0.6030, as nervous markets watch the transition of the economies through the lock-down gears. The relative success of the lock-downs, will determine how quickly these economies re-open and recover. Markets will await the latest musings of the RBA.

The US and Europe are in various stages of re-opening and infection rates will determine the success, along with economic growth data.

Collinson FX: May 4, 2020 - Trump takes on China

April was a month of record gains on equity markets, but risk off sentiment prevailed, to close out the week. President Trump looks to be taking the Chinese Communist Party to task over the spread of the coronavirus globally. Trump has said he suspects the virus came from a laboratory in Wuhan, China. Trump also asked the question 'why the communist party closed travel between Wuhan and the rest of China and not the world'? Larry Kudlow, key Trump financial advisor, said the Chinese will be held accountable. This rhetorical language boosted speculation of a trade war between China and the USA, which lead markets lower to close the week out.

The coming week will be dominated by news of the success or failure, as global economies reopen. The RBA and Bank of England both release monetary policy statements in the coming week, but action will be confirmation of well set out intentions. Markets have been dominated by treatments and the contribution to the' control and containment' of the coronavirus.

It does appear that the US and allies, will attempt to hold the Chinese accountable for the virus. The Chinese Communist Party are fighting back and refusing to accept financial responsibility for the world-wide pandemic. It is a media and culture war that will be fought out and the narrative will be hotly contested. The economic impact has yet to be determined but the conflict appears to be growing.

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