Collinson FX: June 16, 2020 - ANZAC's exposed to second wave
by Collinson FX 16 Jun 2020 23:37 AEST
17 June 2020
V5 (David Nathan)- RNZYS Club Marine Insurance Winter Series - May 16, 2020 © Richard Gladwell / Sail-World.com
Collinson FX: June 16, 2020 - ANZAC's exposed to second wave
Markets opened the week with little economic data releases to drive market direction, so attention turned to the macro issues, of trade and the return of the virus.
Chinese cases spiked up and fears over a second wave swept Asian markets, which flowed through to European markets.
Losses in equities reflected the fears of a 'second wave' in Europe and the US, which suffered spikes in certain US States. Early losses on US bourses were arrested by the Federal Reserve, which announced they would extend the 'QE Infinity' to purchases of individual corporate bonds!
This is a major step away from the Fed's previous role and now, could be seen as interference in markets by 'picking individual winners and losers'?
The reversal in US equities, triggered a major reversal in currencies, as the US Dollar turned sharply lower. The EUR jumped to 1.1320, while the GBP looked to regain 1.2600, as fears were allayed. Trade with China remains a distinct issue, as the aggressive political actions, may be met with sanctions. The trade exposed commodity currencies were able to benefit the flagging reserve, with the AUD rising above 0.6900, while the NZD pushed back to 0.6470.
NZ and Australia have achieved 'control and containment' of the virus, but they remain vulnerable to fears over a 'second wave', while exposed to China trade repercussions.
Collinson FX: June 15, 2020 - Bull run stops for profit-taking
US markets have been on a tear, in a 'V-shaped' recovery in equity markets, despite suffering massive losses on Thursday. The strong bull run was interrupted with profit taking, but the recovery resumed Friday, to close out the tumultuous week. The Dollar rebounded forcing the EUR back to 1.1250, while the GBP crashed to 1.2540, following some shocking economic statistic releases. UK GDP suffered enormous contractions, while Trade, Industrial and Manufacturing Production, all suffered severe losses due to the economy shut-down.
The economic recovery is under way and assisting the trade exposed commodity currencies. The huge risk-off moves smashed the currencies Thursday, but stabilised to close out the week. The AUD settled around 0.6850, while the NZD traded 0.6440, relying heavily on the mood of the reserve currency.
Global economic data remains challenging but improving from historical lows. The vulnerabilities remain, with virus threats and trade concerns surrounding China. It is likely to be a huge week coming up, with big data releases and risk appetite tested.
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