Daily Market Commentary 20th July 2021

Global equities collapsed overnight, following large losses to close out the previous trading week. Market sentiment was weak Friday, following major concerns over inflation and the impact on monetary policy. The fuel poured onto this fire, came in the form of a surge in the latest variant of the virus. Europe and the US has seen a surge in virus numbers, despite widespread vaccinations, after Australia has struggled with a relapse and lock-downs. US 10 year bond yields fell to 1.18%, while oil prices crashed, as production increases and demand impacts from economic slow downs.

The virus fears and the political reactions become the topic du jour, blowing out any and all brave economic recovery forecasts. The delta variant is highly contagious, but far less dangerous, although it will not stop bed-wetting politicians from shutting down economies across the world. The people may not be up for another series of lock-downs, as we see protests spreading. The EUR held steady amongst the turmoil, trading 1.1800, while the GBP held above 1.3750.

The commodity currencies have suffered further damage, with the AUD falling to 0.7330. while the NZD crashed to 0.6930. Commodity prices do not suffer these lock-downs well, while the reserve remains relatively attractive as a safe haven. RBA minutes today may reveal contingency plans for further economic instability, while Japanese inflation is not likely to spread fear, due to anaemic growth.