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Collinson FX: November 19 - Treading the COVID water

by Collinson FX 18 Nov 2020 04:41 PST 19 November 2020
American Magic - Waitemata Harbour - November 17, 2020 - 36th America's Cup © Richard Gladwell / Sail-World.com

Collinson FX: November 19 - Treading the COVID water

Global equity markets tread water overnight and the US Dollar continued to drift, with the rise in risk appetite. Coronavirus infection levels continue to surge across Europe and the USA, but the market has been assured by the news on the vaccine front. UK and EU CPI inflation has been insipid, with the EU coming in at 0%, while the UK improved to 1.5% annually. Growth will continue to be challenged, as the recent European lock-downs, feed through to the economic data. The Post-Brexit EU/UK trade agreement, must come in the next few days and the devil will be in the detail.

US Building Permits and Housing Starts remained strong, as the US battles to recover, but there is no consensus on the virus and how to manage it. The virus has become very political, with many States opting for controlled reaction, while others opt for lock-downs and shades-of therein. The vaccine will hopefully make these inequities moot, but the damage will be in the record books. The EU Meeting will begin tonight and the blow-out record budget deficit will be considered, including the $750 Billion 'communal' virus bail-out package. This could be a cause of much apprehension, due to rising dissension amongst member States. EU/UK Trade negotiations/agreement will also likely to be a contentious issue on the agenda.

Australian Unemployment data is likely to be an issue locally, with a rise expected. The welfare measures have been largely extended, compliments of the deficit/debt, so employment is highly disguised and underrepresented.

Collinson FX: November 18 - Vaccine Rally stalls

The 'Vaccine Rally' ran out of steam overnight, after reaching historically record levels, on US Stock Markets. The post-US election rally was sparked by the announcement of vaccine effectivity rates and now investors are taking profit. US Retail Sales missed expectations, only increasing by 0.3%, which was also a drag on market sentiment. The safe-haven US Dollar continued to decline, with the EUR rising to 1.1870, while the GBP jumped to 1.3240. There are high hopes for a UK/EU Trade agreement in the next few days, which would be a boon to both currencies and economies.

The trade exposed commodity currencies drifted off highs, in line with market sentiment and global equity markets. The AUD dipped back below 0.7300, while the NZD drifted to 0.6880, despite better than expected global dairy prices. The spread of the virus continues to threaten European and US economies, as politicians implement harsher economic and social measures to contain the spread. Markets will await the post-Brexit trade deal and economic developments, while monitoring Central Bank actions and strategies.

Collinson FX: November 17 - Moderna vaccine boosts markets

Global equity markets rallied strongly after further promising news regarding a vaccine. Moderna confirmed that their vaccine had a 94%+ effective rate and could be stored at lower temperatures. This was great news for markets and equities rallied, while the safe haven Dollar, lost further ground. Risk appetite is climbing with economic sentiment. The EUR rallied to 1.1830, while the GBP pushed up towards 1.3200, despite no final post-Brexit trade agreement. The trade agreement is well overdue and news is expected this week.

Chinese Industrial Production, Retail Sales and Employment all showed positive signs. The Japanese GDP spiked upwards and Industrial Production jumped 3.9%. The improved market confidence and the flagging reserve, saw the AUD bounce above 0.7300, while the NZD fast approaches 0.6900. These trade exposed commodity currencies are enjoying the surge in markets confidence but remain extremely vulnerable to global events.

Look for the EU/UK trade news, virus/vaccine and political developments in the US to drive markets over the coming few days.

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