Weekly Market Commentary commencing 9th November 2020

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The last week has been dominated by the US Election, which looks to have delivered a victory for the Democrats, although the final result may be plagued by litigation for some time to come. Equity markets were positive for most of the week, although just recovering, that what was taken off the table, in pre-election hedging. The rise in risk sentiment has allowed the safe-haven US Dollar to settle lower. The EUR has closed the week trading up towards 1.1900, while the GBP jumped to 1.3150, despite all of the problems faced in Europe. Parts of Europe remain under lock-down, due to the spike in the coronavirus, while no deal has yet been agreed in the post-Brexit trading world.

The FOMC meeting was largely overlooked and overshadowed by the US election confusion. They left rates unchanged and continued to promise virtual QE infinity. We are now faced with a new world reality for the coming few years. Political, fiscal and monetary policy is likely to undergo a transformation in America, which will completely change the current status quo. Monetary Policy is likely to remain similar as there are no real alternative options. Massive monetary expansionism is with us for the foreseeable future. Fiscal largesse will expand and international trade will return to pre-Trump globalism.

The softer reserve has allowed the commodity currencies to regain previously lost ground, with the AUD pushing above 0.7250, while the NZD pushed through 0.6750. Macro economic issues have driven markets and this is likely to continue in the coming week, with the US election and the virus key determining factors. Introspection and analysis will come.

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