Daily Market Commentary June 26th 2020

Coronavirus cases continue to rise globally, with record numbers in the Southern US Sun-Belt States. The spike upwards can be attributed to a massive expansion in testing, although the hospitalisation numbers reflect a more concerning trend, triggering remedial actions in hotspots. This has dampened enthusiasm for the rambunctious ‘V-Shaped’ recovery in global equity markets. This has also reversed trends in the US Dollar, as risk appetite diminishes, the Dollar becomes more attractive. The EUR fell back to 1.1200, while the GBP now tests 1.2400, on the downside.

US markets were boosted by actions taken by the FDIC, to remove restrictions on banks, imposed following the GFC. The rally in Bank shares offset fears over the rising spread of the coronavirus. Trade concerns remain, as the EU rejects US threats over European aircraft subsidies, while China continues to be at risk of further US sanctions. The trade threat is the biggest danger to the trade exposed commodity currencies and the rise in the reserve, reduced enthusiasm for the trans-Tasman currencies. The AUD slipped back to 0.6850, while the NZD tests 0.6400, despite a narrowing trade deficit. NZ Export returns improved, but imports declined, along with domestic demand. The improving headline number is economically undermined by the sharp fall in demand for imports, confirming weakness in consumer demand.

Trade remains a big threat to markets, while the immediate threat of a virus spike, drives daily investment emotion.