Weekly Market Commentary 11th January 2021

US Equity markets ended a tumultuous week, near record highs, while the US Dollar staged an insipid come-back, from lows. The EUR retreated back to 1.2230, while the GBP traded 1.3550, perhaps a recognition of security? US markets have been captivated by the political disruption enveloping Washington, while brushing off the economic mayhem caused by administrative shut-down/lock-downs. Politicians have imposed onerous sanctions on economies, in reaction to a pandemic that has failed to cause more lethal damage than previous years ‘normal’ morbidity rates. Politicians discovered newfound authoritarian powers and have embraced them with enthusiasm, wreaking havoc on global economies and small/medium sized business. The piper will be paid, but long after the current crop of political leaders have retired to their luxurious and generous pension fueled after-life, with unprecedented deficit/debt.

The isolated Southern Hemisphere nations have inherent geographical protections, to prevent further infections of the current flu virus, but at what cost? Trading nations are operating under dire circumstances and the nature of the global economy ensures no country is immune from the devastation, caused by public health policy. Everything is relative and the Central Bank monetary policy, across the globe, has ensured unprecedented liquidity creating massive asset bubbles. Commodity currencies have been beneficiaries, although a recent resurgent US Dollar has allowed the AUD to retreat back to 0.7750, while the NZD has settled just below 0.7250.

Economic and social disruption will continue, due to over-reactionary regimes  and this will have huge repercussions for global economies.