Daily Market Commentary 29th of June 2020

Markets closed the week much lower on Friday’s close, as fear spread over the spike in coronavirus, across the Southern States of the USA. The rise in infection rates and hospitalisation levels, triggered action from the Texas Governor. Governor Greg Abbott paused the re-opening process, closing bars and advocating mask-wearing. The fear of a ‘second wave’ and the impact on the US economy, has killed risk appetite. US equities markets plunged to close out the week and remained nervous. The US Dollar remained surprisingly resilient, with the EUR holding 1.1220, while the GBP dropped to 1.2340.

The Federal Reserve release their Bank Stress tests and there were warning signals. They offered the potential scenario, where US Bank Capital levels may approach minimums requirement levels, thus forcing cuts in dividends and stock re-purchases. This triggered a big sell-off in Bank stocks, more than wiping out the big gains in the previous session, sparked by the Fed eliminating GFC regulations. This may have been a pre-emptive action?

The progression of the pandemic, over the weekend, will determine the market mood come Monday. The coming week has key employment date from the USA and is the end of the second quarter. Trade remains a huge macro issue and will impact the trade exposed commodity currencies. The AUD closed the week trading around 0.6850, while the NZD holds 0.6400, with a big week ahead.