Weekly Market Commentary 31st August 2020

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US bourses closed out the week strongly, supported by a strengthening economy and an extremely supportive Federal Reserve. The Fed Chairman, Jerome Powell, issued new guidelines for future monetary policy. Powell outlined how the Fed would alter the Employment/Interest rate relationship, allowing interest rates to remain at record lows for an extended period. This is a major support to equity markets, investment and debt sustainability. The Dow is now approaching record highs, after the Nasdaq and S&P blew through these historical highs.

The pandemic is now generally under control, with global economies reopening and booming, while authorities contain outbreaks. This is in contrast to NZ and Australia, who have reacted by lock-downs and extreme actions to combat outbreaks. The economic damage is being hidden by the largesse of the State, providing support through massive deficit and debt programs. There will be a massive toll to pay anon.

The Fed’s policy actions have allowed the US Dollar to recede, with the EUR regaining 1.1900, while the GBP spikes to 1.3350! The flagging reserve and improving trade conditions, between the US and China, have allowed the commodity currencies to rally strongly. The NZD surged to 0.6730, while the AUD jumped back above 0.7350, ahead of the RBA meeting this coming week.

Global markets continue to re-open and monetary support/stimulus drives growth, while the virus declines as authorities employs successful containment strategies.

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