Daily Market Commentary 18th August 2021

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US equities crashed overnight, seemingly triggered by an unexpected fall in US Retail Sales and more general doubts over the economic recovery. The US economy is under major threat from both economic conditions and geo-political threats. The big fall in Retail Sales was unexpected and shook markets, considering the fiscal and monetary largesse, flooding markets. The broader Geo-Political disruption stems from the collapse of the US-backed regime in Afghanistan, which directly impacts their position globally. US Industrial and Manufacturing Production also missed expectations, although remaining positive, was a bad sign of economic recovery.

The EUR slipped back to 1.1710, despite a surge in preliminary reading of GDP growth, while the GBP dropped to 1.3770. UK employment continues to improve, with the headline Unemployment rate falling to 4.7%, while the economy continues to reopen. NZ suffered a further lockdown yesterday, after the detection of one infection case. They are following the impossible zero-infection rate strategy and one which is being unsuccessfully being pursued in Australia. This has the potential of disrupting the economic recovery and perhaps influencing to RBNZ interest rate decision. The NZD crashed to 0.6900, perhaps indicating the markets anticipates the deferral of the highly anticipated interest rate rise, set to be announced later today. The AUD also crashed, falling to 0.7240, as sentiment fell and the reserve rallied in response to international events.

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