Daily Market Commentary June 19 2020

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The Bank of England left interest rates unchanged, but added GBP100 Billion to their QE program, citing ‘less-than-stellar economic prospects. The GBP reacted, falling back to 1.2415, as the UK struggles with the re-opening of the economy. The UK was hit late and hard, by the virus and launched into a severe lock-down. The economy is being slowly resuscitated, but the damage has been done and markets will begin to see the fall-out, after the dust has settled. Europe, in contrast appears to be opening up a lot quicker, especially within the EU Zone of countries, having been hit hard and early. The EUR traded at around 1.1200, as the reserve regained some lost ground, but fears over a ‘second wave’ of the virus appear to be dissipating.

The AUD Dollar fell back to 0.6840, after some disappointing employment numbers were released. Australian Unemployment rose from 6.4%, to 7.1% and the participation rate fell. This was clearly disappointing, but expected and the Government have reacted with major infrastructure spending proposals. The NZD also drifted lower, falling back to 0.6420, after the GDP growth rate contracted more than expected. The NZ economy contracted 1.6%, far lower than expected, amid a return of the proclaimed ‘conquered’ virus!

The virus remains a constant and underlying threat to markets, although appears to remain under control, while Geo-Political threats appear to be on the rise. China has been in open conflict on their border with India, while conducting expansionary policies in the South China Sea and regarding Taiwan. China is also yet to face retaliation for the pandemic release. This is unsettling to the existing supply chain, which is particularly relevant to the trade exposed, commodity currencies.