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Collinson FX: June 24, 2020 - NASDAQ reaches new high

by Collinson FX 23 Jun 21:25 PDT 17 June 2020
Out of the lockdown - Waitemata Harbour - June 2020 © Richard Gladwell /

Collinson FX: June 24, 2020 - NASDAQ reaches new high

Fears over the US-China Trade Deal had shaken markets early in the trading day, but US Trade Negotiator Peter Navarro, reassured markets that the agreement remained in place. Navarro touted the implementation of Phase 1 of the agreement was underway, despite the Chinese lack of candour and responsibility for the Pandemic.

The NASDAQ surged to new record highs, boosted by stronger PMI data in Europe, Australia and the USA. The Dollar continued to drift lower, with the EUR rising to 1.1300, while the GBP broke back above 1.2500.

The Australian PMI number came in at 52.6, showing a substantial turnaround, moving into positive territory. The AUD remained static, trading above 0.6900, while the NZD remains below 0.6500, ahead of the RBNZ rate decision. The Central Bank is not expected to adjust rates, but markets will wait for the associated economic commentary and any adjustments to ‘QE’.

The trade exposed commodity currencies remain exposed to any disruption in the supply chain and the current crises facing China and the USA could devolve?

Collinson FX: June 23, 2020 - Chicago Fed National Activity Index turned positive

The Chicago Fed National Activity Index turned positive overnight, one of the few major economic data releases, allowing markets to focus on the economic recovery. The re-open is charging along at a great pace in the USA, while the rise in viral infection, is explained by the increase in testing. The US is experiencing a ‘V-Shaped’ recovery in the stock markets, which is always a predicter of the future. The rising confidence allowed the US Dollar to settle, with the EUR climbing to 1.1250, while the GBP rebounded to 1.2460.

The German Bundesbank commented on the recovery in Germany. They recognised that Germany was past the low point, but restrictions were being lifted slowly, so expectations are for only a gradual recovery. The RBA Governor Lowe was also out in the media, confirming the Australian economy was outperforming, but the caveat was fast to follow, that the shadow of the virus could last for years. He noted the strong performance of the Australian Dollar, boosted by the success of the countries management of the pandemic, although he would prefer it lower to assist the recovery. He also urged the Government to use the opportunity to implement long-term structural economic reform. The AUD rallied back above 0.6900, while the NZD also gained on the softer reserve, rising to 0.6480.

Economic data releases will continue to improve as global economies re-open. The threats remain the Chinese and their aggressive Geo-Political activities and the impact this will have on global trade.

Collinson FX: June 23, 2020 - Very strong week on equity markets

Markets were lower, to close out a very strong week on equity markets, highlighted by developments in the treatment of the coronavirus and global control and containment. The other major boost to markets was the Federal Reserves expanding their ‘QE Infinity’ to include the purchase of individual corporate bonds. Markets surged earlier in the week, to post big gains on stock markets , but there were ‘ebbs and flows’ to close out the week. China is now looking to step up US purchases in accordance with ‘Stage One’ of the US/China Trade Deal.

The Dollar staged a bit of a recovery rally, as risk appetite rose and fell, reversing recent trends. The EUR fell back below 1.1200, while the GBP retreated to 1.2350, amidst mixed economic numbers. The UK was hit late and hard by the virus and is way behind the curve, coming out of the lock-down much more slowly and later than Europe and the USA. UK Retail Sales contracted 13.1%, much better than expected and lower than the previous number, which had contracted 22.7%! UK Public Sector debt has blown past total GDP, which is the worst ratio since 1963, but fiscal prudence is a thing of the past?

The rising reserve dampened enthusiasm for the trade exposed commodity currencies, with the AUD falling back to 0.6850, damaged by the week labour market numbers released during the past week. The NZD dropped to 0.6400, hit by the rising USD and surprisingly weak GDP numbers, confirming the dire economic situation facing the country.

The coming week will probably be dominated by the virus containment, trade and Geo-Political issues. China’s aggressive actions in India, Hong Kong, Taiwan and the South China sea have frightening potential to light up the region. This will directly impact global markets and the existing supply chain.

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