European and US equity markets both suffered losses overnight, dragged lower by the lack of solid economic data releases, allowing markets to focus on the rising coronavirus cases in the Southern US States. Virus infection rates have spiralled upwards in Southern US States and now hospitalisation rates have started to climb, thus forcing State Governments to limit elective surgeries. The weakness in the share market is not dramatic, but is significant, considering the ocean of monetary stimulus. This allowed support to return to the Dollar, with the EUR falling below 1.1300, while the Yen trades 107.20. The GBP held onto gains, trading above 1.2600, supported by new Government stimulus supporting’ business return to work’ and ‘restaurant subsidies’.
Global treatments and development of vaccines continue to progress well, but the uncertainty surrounding effectiveness and timing of these solutions, extend uncertainty. German trade was positive and both Exports and Imports returned into positive territory, but were much weaker than expected, disappointing markets. The rising virus infection rates are being felt in Australia too, with a second wave hitting Melbourne hard, forcing Metropolitan Melbourne into a renewed six week lockdown. The rising reserve pushed the AUD back to 0.6950, while the NZD drifted back to 0.6550, as nervous uncertainty creeps back into the economy.
These trade exposed commodity currencies have fared well in this recovery, but a second wave is a major threat, as Melbourne has so dramatically exposed. The Chinese Geo-Political situation remains tense, as Western Governments begin to impose sanctions, on the Chinese Communist Government. This is where the real threat lies, to the supply chain and global trade.