Daily Market Commentary 30th October 2020

European markets continued to tank, as France and Germany decide to lock-down their economies, once again. It does seem strange that they have decided to use lock-down as a weapon against the virus, when all orthodoxy has warned against this and it failed the first time around? Quarantine the aged and vulnerable and employ safety measures, while going about your business, was (and is now) the orthodoxy. Lock-downs destroy the economy and have devastating health effects, while it appears the virus is deadly only to the immune deficient. Europe has been inundated and reverted to lock-downs, except Sweden, which never shut down and now have ‘herd immunity’. The US rebounded strongly, with GDP surging by 33.1%, the biggest jump in history, by a huge margin. The ‘V-shaped’ recovery appears to be well underway.

The extreme volatility is no surprise, in the last week of the US Presidential campaign, with investors keen to take money ‘off the table’ to await the US election outcome. The volatility has finally seen the safe haven US Dollar move upwards. The GBP fell back to 1.2915, while the EUR plunged to 1.1660, after the ECB left rates and monetary policy unchanged. The ECB has indicated further monetary action may be required in December. The UK and EU have reached the deadline for a post-Brexit trade deal, which will impact both currencies and the cost of failure may be too high to fail?

Commodity currencies suffered the spiking reserve, with the AUD falling to 0.7020, while the NZD is testing 0.6600 on the downside. The RBA has noted the economic recovery is underway and the recession is over, even though economic data is yet to confirm this. The virus appears to be under control and the economy, despite isolation, may be recovering. The virus and the US election is set to dominate markets until next Tuesday.