Daily Market Commentary 18th June 2020

Markets were consolidating, after recent gains following great economic data releases and promising drug treatments for the coronavirus. US Retail Sales spiked 17.7%, with record gains, while the results for treatment of the coronavirus with ‘Dexamethazone’ showed great promise. The IMF is warning of downgrades, on expected global growth rates,  which could dampen enthusiasm for the ‘V shaped’ recovery. The US market looks to be recovering strongly and economic data is reflecting that, while President Trump is set to announce a $ 1 Trillion infrastructure bill.

The Federal Reserve Chairman, Jerome Powell, appears in front of the Senate Banking Committee and has sobre warnings for the US economy, while singling out Small Business as being in particular danger. US Building Permits and Housing Starts turned positive and confirmed progress in the housing sector, a leading economic index. The Dollar was steady with the EUR trading 1.1225, while the GBP drifted to 1.2550.

Commodity currencies inched upwards, with the AUD approaching 0.6900, while the NZD broke back above 0.6450. Australian New Home Sales slipped backwards, but the Government has been announcing massive infrastructure projects to carry the economy through this recession. NZ awaits their GDP number, which is a historical number but is expected to reflect the ‘lock-down’. This number will be weak, but the question is whether it will turn negative, or not?

The recovery is hard to resist, despite the efforts of some Governments to keep economies closed, but significant challenges remain. There are a lot of the challenges and many of the are becoming political. Geo-Political risks in Asia are on the rise, with China and India fighting border skirmishes and North Korea antagonising South Korea. The virus is making reappearances in China and keeps the fear of a ‘second wave’ alive. Economic confidence is on the rise despite all of the risks.