Weekly Market Commentary 27th July

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US equity markets closed lower, as US/Chinese tensions rise. The US has closed the Chinese Consulate in Houston, Texas and arrested alleged spies. The Chinese have retaliated, ordering the closure of the US Consulate in Chengdu. The US/Chinese relationship is deteriorating rapidly, with the escalation in tensions morphing into sanctions. This may continue and could include key Western allies. US equities fell as a consequence, along with the US Dollar. The Yen moved to 105.95, while the EUR jumped to 1.1650, boosted by strong flash PMI data.

The virus marches across the ‘Sun Belt’ of the Southern US States, but remains contained, as treatments and progress on the vaccines continue. Market focus is now on the deteriorating Geo-Political relationship between China and the West. Tensions are escalating and could impact the supply chain. This is the fear of the vulnerable, trade exposed, commodity currencies. The AUD dipped below 0.7100, despite the flagging reserve, while the NZD traded back to 0.6630.

The coming week will be dominated by the virus and the US/China relationship, while economic data will define the progress of individual economies and currencies.

Collinson & Co Contact