Daily Market Commentary 20th August 2020

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The Fed minutes were released overnight, dampening enthusiasm in equity markets, after the S&P and Nasdaq hit all-time record highs. The Fed warned that the pandemic would ‘weigh heavily’ on the recovery in the US economy. President Trump refused further trade talks with the Chinese, as their relationship rapidly deteriorates, becoming a key election issue in the USA. This will have serious impact on global trade. The gloomy predictions from the Fed, dragged equities from their record highs and boosted the safe haven US Dollar. The EUR sharply reversed recent gains, plunging to 1.1850, while the GBP traded around 1.3100. This reversal in the GBP was after strong recent gains, highlighted by a spike in inflation, which smashed expectations.

The pandemic remains a major macro influence on global markets, while the deteriorating US/China relations is also slamming global confidence. The impact on the supply chain will be negative and this will disproportionately hurt the trade exposed, commodity currencies. The AUD fell back below 0.7200, while the NZD traded 0.6570, both being impacted by pandemic related lock downs and a rising reserve. Maersk, the largest shipping company in the world, reported much better than expected earnings. Lower shipping volumes were overcome by rising rates, lower fuel costs and rising profitability in their Freight and Logistics. This is a great sign for global trade, as the economic recovery progresses forward.

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