Weekly Market Commentary beginning 24th August 2020

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US Equity markets closed on a high Friday, with both the Nasdaq and S&P reaching yet more record and historical highs! Markets received a boost from US economic data, when Services, Manufacturing and Composite PMI all beat expectations. US Existing homes sales also surged by 24.7%, another record, reflecting a strong performance in the leading housing sector. The PMI data was in contrast to European, Japanese and Australian PMI which were benign at best. The EUR fell back below 1.1800, while the GBP tumbled to 1.3090, amidst mixed economic numbers.

The coming week is fairly light on economic data releases, which will probably mean that markets focus on macro economic and political issues. The pandemic and the impact on economies, will continue to dominate underlying conditions, while the deteriorating US/China relationship will probably escalate. US Presidential campaigning for the coming election will increasingly impact markets, with China becoming a major issue, while the outcome of the election will be a directional ‘game changer’.

The US/China relationship will determine the existing supply chain and directly impact the trade exposed commodity currencies. The pandemic is severely damaging the New Zealand and Australian economies and a plan for the future would be handy? The economic impact of this pandemic has been devastating, but heavily disguised by the massive Government support programs, which cannot continue in their current form. Elimination of the virus is not a feasible plan unless there is a vaccine forthcoming. The AUD closed the week lower around 0.7150, while the NZD has suffered dramatically, heading back toward 0.6500.

The pandemic and US/China relations will continue to dominate these commodity currencies.

Collinson & Co Contact