Weekly Market Commentary commencing 19th October 2020

US Retail Sales jumped 1.9%, better than the 0.7% expected, giving markets a boost to close out a lacklustre week. Markets spent a week dogged by the resurgence of the virus in Europe and suspension of two of the vaccine trials. US markets have been distracted by the lack of a further stimulus from House Leader Pelosi. The refusal of the House to negotiate will be moot, after the election, which will deliver fiscal stimulus post-election. The lack of action and weaker markets saw a safe-haven US Dollar revival. The EUR has fallen back to 1.1700, while the GBP has traded back to 1.2920, as the resurgent virus triggers Governmental restrictions.

The rising Dollar has forced the commodity currencies lower, with the AUD falling below 0.7100, while the NZD toys with 0.6600. There will be a lot of volatility in the markets, in the lead up to the US Presidential elections, while local markets will be impacted by the NZ election. Economic data will reflect the re-opening of global economies, although European markets are being severely damaged, by the resurgent virus.

Labour won the NZ election in a landslide. The victory was anticipated by markets, but the magnitude of the victory was not. The currency will likely be fairly stable although the prospect of a Labour Government usually brings downside pressure to the currency. The focus now turns to a fast approaching US Presidential election, which has probably never been more important, with President Trump set to confound the polls again?