Daily Market Commentary 21st October 2020

Markets surged again overnight, on the prospect of a further stimulus deal, from the US. US House Leader Pelosi continued negotiations with Treasury Secretary Steve Mnuchin overnight and said they were ‘making progress’. There are high hopes of an agreement before the day is out! This would be a mega-stimulus package and follows three previous bail-outs. Fiscal prudence is a long ‘dead and buried’ concept of economic history. The EUR rallied to 1.1830, while the GBP drifted back to 1.2940, after trade negotiations were extended beyond the deadline.

The RBA released the minutes from the October meeting, which did not lend to inspirational economic prospects. The RBA maintained that the recovery was’ slow and uneven’ and that they would continue to provide highly accommodative monetary policy settings ‘as long as required’. The global economy was showing signs of a gradual recovery. This did little to reinforce the recovery in the currencies, with the AUD slipping to below 0.7050, while the NZD gave up 0.6600. The rally in US equities however, has allowed the reserve to retreat and these commodity currencies are fighting their way back!