Daily Market Commentary 5th August 2020

Global equities continued to climb, supported by the absolute ocean of monetary and fiscal stimulus, plus stronger Manufacturing data in Europe, Asia and the USA. US Factory Orders expanded 6.2% and earnings have been strong in both Europe and the USA, except for a growing concern in the banking sector. Banks are reporting massive expansions of bad debt provisions, signaling some testing times ahead. The EUR was steady, trading 1.1780, while the GBP drifted back to 1.3050.

The RBA left rates unchanged, but the associated commentary allowed some confidence to boost markets. The RBA Governor said that the economic downturn was not as severe as originally feared, but warned the Victorian lockdown was having a ‘major impact’. Australian Retail Sales improved 2.7%, while trade numbers were depressed, but moving upwards. The AUD reacted well overnight, with the AUD trading up to 0.7150, while the NZD tests 0.6600 on the downside.

The RBA has indicated that they will enter the secondary market to purchase Government debt, which is a dangerous development in monetary policy, while NZ Unemployment data may impact local markets.