Daily Market Commentary 19th August 2021

The Fed Minutes reveal plans for tapering the Feds monetary policy, which was in line with expectations. US Housing Starts contracted 7%, while Building Permits increased 2.3%, confirming a softer housing sector. Despite the avalanche of fiscal and monetary largesse, the economic recovery is coughing and spluttering. In Europe inflation was higher than expected, coming in at 2.2%, but this is despite much of the EU in various stages of shut-down for most of the year. This, along with mountainous debt and deficit, will be the ruin of global economies. The EUR stumbled to 1.1710, while the GBP drifted to 1.1760, as their CPI missed expectations (2%).

The RBNZ were expected to move to raise interest rates, in yesterday’s RBNZ OCR decision, as had been telegraphed. The world’s media was shocked when the Government threw the country into a harsh lockdown, for one case of the virus! Global media was collectively astounded by the action, but it was enough for the RBNZ to baulk and hold rates at record lows, while more infections are being reported ipso facto. The damaging lockdown will not be for days, as initially indicated, but will be devastatingly extended. This is the MO of the Government and other feeble minded counterparts, across the Tasman. The NZD plunged on the news , trading back to 0.6870, while the AUD fell back to 0.7240.

Look for virus news to dominate the NZ markets for some time to come, as it does the Australian narrative. Markets will await the Japanese Tankan report today and the release of Australian Employment numbers.