US markets turned sour overnight, despite fiscal stimulus and promises of more to come. The US congress have turned the fiscal stimulus taps on and money is pouring into the economy, complimenting the avalanche of monetary stimulus from around the world. The problem is that world economies remain in various stages of lockdown, living in fear of another virus invasion. Governments across the world have mishandled the pandemic and overreacted with closures of the economy, when this has not worked in the past and is a failed historical solution.
The US economy is reacting to further fiscal and monetary stimulus with asset bubbles, keenly lead by equities. This is an extremely risky and tenuous strategy as ‘printing money’ cannot and will not be the solution. Currencies must be impacted, with the EUR trading 1.2230, while the GBP fell back to 1.3450. These currencies are all severely undermined by their Central Banks and it appears to be a fight to the bottom.
Commodity currencies reflect the story of lack of pandemic mayhem, with the AUD jumping back above 0.7600, while the NZD pushed up to 0.7150. These commodity currencies continue to export while enjoying the benefits of relative geographical isolation. All of these economies are ignoring deficit and debt on a scale not seen since WW2.