Weekly Market Commentary commencing 14th September 2020

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Equity markets have had a temporary malfunction, but it is not yet certain whether it is a full blown correction, or just profit taking on over-bought Tech shares. The second wave of the virus is well under way in Europe, while it seems to be on the decline in the USA, but politicians have learnt a tough lesson. Economies are re-opening and attempting to return to the ‘new normal’!? The focus has now turned to the US Presidential elections and global trade. The US/China trade relationship is under great pressure, while the EU and UK, look to have decided to end a post-Brexit trade deal. The GBP has been under extreme pressure because of this, falling below 1.2800, but this may be superfluous to UK trade prospects. The UK announced a huge trade deal with Japan and it is likely that there are many more in the offing.

The coming week will be highlighted by Central Bank speculation, with decisions from the FOMC, the Bank of Japan and the Bank of England. There will massive speculation surrounding the prospects of further monetary stimulus and this will drive market activity. Commodity currencies have settled, with the AUD trading 0.7270, while the NZD holds around 0.6650. Central Bank actions and supply chain threats will dominate these trade exposed currencies. There are worrying signs, in the trade sector, with big import cost rises being suffered and long delays to the supply chain.

The pandemic rages on, but authorities are managing the threat, learning from previous lock-down mistakes. This lesson has not been learned in Australia, particularly the State of Victoria, suffering the most extreme lock-down restrictions of anywhere in the world. The Victorian experience is devastating the State and National economy and social and political pressure is rising, so changes are likely. The US Presidential election and the impact on global trade, will continue to dominate markets.

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