Daily Market Commentary 25th June 2020

European and US equity markets plunged lower, as fear of the dreaded ‘second wave’ enveloped markets. There have been ‘hotspots’ in Germany, which have been addressed by ‘local lockdowns’, but the US spike in cases has been more uniform across the sun belt States in the USA. Florida, Texas, California and Arizona have seen big rises in cases, as the economies re-open, but it is the spike in hospitalisations that a more worrying. The spike in cases can be attributed to expanded testing, but the severity of the resurgence and hospitalisations, is the big problem. Equity markets plunged, while the Dollar regained some momentum, while oil prices turned south. The GBP fell back to 1.2425, while the EUR dropped to 1.1250, reflecting risk appetite.

Trade was also a big concern, following the warnings over the US/China Trade Agreement, as more fears rose over European sanctions. The US has threatened to impose tariffs on the UK, France, Spain and Germany over protections of their aircraft manufacturing business. Fears over trade and threats to the supply chain, directly impact the trade exposed commodity currencies. The AUD fell back to 0.6860, while the NZD plunged to 0.6400, following the RBNZ rate decision.

The RBNZ left rates unchanged, but reassured markets they stood ready to act, as necessary. The observations were that the virus had not hit the economy, as hard as anticipated and the fiscal response had been larger than expected. They did warn of significant economic challenges ahead.