Daily Market Commentary 16th September 2020

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Global equity markets continued to book gains, supported by re-opening of markets and improving economic activity. Chinese Retail Sales expanded, as did Industrial Production, looking to a ‘return to normal’. The theme of positive news extended to European markets, with German and EU ZEW Economic Sentiment reports, improving at a greater rate than expected. In the US, the Empire State Manufacturing Index, also jumped at a greater margin than expected. This combines with imminent progress on the push towards a global vaccine, while big advances are being made in treatment and cures, allowing infection rates to rise but mortality rates to plunge.

Markets are now turning their attention to Central Bank interest rate decisions. The FOMC, Bank of England and Japan are all making their interest rate decisions and announce future monetary policy. All are likely to maintain current extremely expansive monetary policy and record low interest rates, supporting investment and debt management. The EUR traded 1.1850, while the GBP regained 1.2900, amidst faltering Brexit trade talks.

The RBA released the minutes of their latest meeting and confirmed that they will ‘maintain highly accommodative settings’, for as long as is needed. This supported the AUD, which rose to 0.7300, while the NZD regained 0.6700. Central Banks will hold their record liquidity as debt explodes across the globe. Interest rates are no longer an instrument of risk measurement, but a mechanism to expand and support debt.

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