Weekly Market Commentary commencing 23rd November 2020

The end of an ambivalent week on the markets. The ‘vaccine rally’ appears to be over and the surge in coronavirus across Europe and the USA now seems to be impacting economic sentiment. Political sanctions/restrictions are being imposed on the ‘populus’ across Europe and the USA, which will impact economic activity and growth, in the short/medium term. The US Treasury is allowing Federal Reserve funded pandemic bailout/stimulus packages to expire on 31^st December, thereby threatening the economic recovery. This strikes fear into markets despite being swamped in liquidity.

UK and EU Brexit Trade Deal negotiators are no closer to a deal, after numerous deadlines have been broken. The EU is preparing for a No-Deal Brexit and the UK is also organising contingencies. This will continue to plague European markets, combined with the surge in the virus, nurtures a very vulnerable economic operating environment. The weaker US Dollar has allowed the EUR to trade back up to 1.1850, while the GBP approaches 1.3300, but are both vulnerable to imminent economic and political threats.

The trade exposed commodity currencies have been massive beneficiaries of the flagging reserve, with the AUD pushing back above 0.7300, while the NZD has blown through 0,6900! These currencies remain extremely vulnerable to global macro economic and political developments. Supply-chain issues continue to plague both economies and the economic recovery remains tenuous, on a welfare driven life support program.