Weekly Market Commentary commencing 26th October 2020

Markets closed yet another tumultuous week lower, slightly disheartened by the lack of progress on a fourth stimulus/bailout package in the US, while attention is focused on the looming Presidential elections. The final Presidential debate is now in the history books and momentum is with the sitting President.  The media may not reflect the economic sentiment, but markets never lie. A Trump victory will trigger a massive boost to equity markets and a surge in economic confidence. Ironically the US Dollar may go lower, as the safe haven process works through the system.

The EUR traded 1.1850, while the GBP held above 1.3030, as the deadline for a post-Brexit trade deal has been extended and now the door is closing fast. A deal will be a major boon for the UK and EU economies and should be reflected in their respective currencies. The coming week will reveal a lot and across the Atlantic, markets will focus on the economy and the GDP number should reflect the ‘V’ shaped economic recovery. Markets are predicting a surge in GDP of over 30%!

Trade exposed commodity currencies are the beneficiaries of a softer reserve, with the AUD trading 0.7130, while the NZD approaches 0.6700. The resurgence of the virus has the potential to disrupt markets, but the historically record low interest rates, should ensure strong gains in equities and asset prices.