Daily Market Commentary 2nd September 2020

US Markets opened September on a positive note, with global manufacturing PMI data improving, as economies reopen. Chinese PMI data improve at levels not seen for nearly 10 years, while US ISM Manufacturing continues to expand strongly. EU Inflation was a major concern, contracting by 0.2%, reflecting major growth concerns, in a severely damaged EUrope. The EUR had traded up to 1.2000, but retreated to trade 1.1915, while the GBP toyed with 1.3400.

The RBA left rates unchanged and warned of the significant threats to Australian growth, confirming that both fiscal and monetary support, would be needed for some time to come. The RBA extended and expanded the Term Funded Facility and outlined expanded purchases of Government debt. The RBA warned that this was the worst economic situation experienced since the 1930’s, but they had a plan to expand liquidity and keep interest rates at record historical lows.

The Australian Dollar briefly broke above 0.7400, but retreated to trade 0.7370 in the face of a resurgent reserve, while the NZD settled around 0.6740. Australian GDP growth data will be released today and is expected to be a contraction of around 6%. These numbers are shocking, but anticipated and is a direct result of Government policies to combat the pandemic.

US/China relations remain a threat during the US Presidential campaign, while virus threats look to be under control.