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Collinson FX: October 14 - Downward pressures expected after NZ Election

by Collinson FX 14 Oct 03:37 PDT 14 October 2020
MRX - NZ Keelboat Nationals - October 3, 2020 © Richard Gladwell / Sail-World.com

Collinson FX: October 14 - Downward pressures expected after NZ Election

Coronavirus surges in Europe and a weak ZEW Economic Sentiment report dampened market enthusiasm overnight. The IMF reviewed global growth forecasts higher, but the surge in the virus and economically restrictive measures employed to combat them, impacted markets. The EUR slipped back to 1.1735, while the GBP crashed to 1.2930, as virus surges and trade talks with Europe continued to flail.

The Chinese have effectively imposed a ban on Australian coal, as the political war between the two trading partners escalates, although the trade numbers continue to reflect massive improvements? This did little for the AUD, which fell back to 0.7150, while the NZD attempted to hold 0.6630. NZ House prices surged, due to lack of supply and cheap mortgages, leading to a surge in credit card spending. The local election on Saturday should provide further downward pressures coming to bear.

Collinson FX: October 13 - EU economy losing momentum as virus surges

US equity markets closed out a huge week of gains, in the week just gone and built on that to open another week. Stocks surged despite the lack of progress on the fiscal bail-out/stimulus package from the US Congress. ECB warned that the EU economy ‘was losing momentum’ and in danger of falling into an even deeper recession, while the virus continues to surge across member nations. Lock-downs have been rejected a weapon to fight the virus, due to the economic destruction it has already caused, but localized measures are being implemented in Spain and the UK. The EUR drifted back to 1.1800, mired in the gloom, while the GBP pushed up to 1.3060.

The rise in equity markets is the direct result of monetary largesse and extreme Central bank policy, across the globe. The rise can only be interrupted by an extreme and negative event, which has permitted the safe haven US Dollar to recede. This has allowed commodity currencies some sort of a recovery, with the AUD holding 0.7200, while the NZD drifted below 0.6650. These currencies will be driven by global markets, although this weeks National election in New Zealand, may have some impact on the local currency.

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