Weekly Market Commentary for 7th September 2020

September opened with fireworks. US Share markets were charging above, or approaching record historical highs, when they hit the wall on Thursday and Friday! The Dow was hurtling towards pre-pandemic highs, when a correction was triggered Thursday, lead by the ‘stay-at-home’ Tech stocks crashing. The Dow lost 800 points Thursday and was down a further 600 points, early in Fridays trading day. The Dow did stage a recovery, on the close, but remains down over 1,000 points in two days! Is this a major market correction or merely profit taking. The coming week will probably tell this story.

The US Dollar, as a safe haven currency, regained some lost ground amidst the equity turmoil. The EUR retreated to 1.1840, while the GBP fell to 1.3285, not assisted by grim economic prospects. The reluctance of the UK to re-open their economy, is translating into economic data and may continue to drag the currency lower. US Non Farm Payrolls added nearly 1.4 million jobs, in line with expectations, while headline unemployment plunged to 8.4%!

Commodity currencies had been experiencing a renaissance but the resurgent Dollar impaired these gains. The AUD trades below 0.7300, damaged by the GDP contraction of 7% (reflecting the parlous state of the economy in recession), while the NZD traded just above 0.6700. These trade exposed currencies remain vulnerable to US/China political and economic developments and continue to depend strongly on the existing supply chain.

The coming week will be highlighted by economic and trade data releases, while Central Bank rate decisions will dominate, later in the week. The Bank of Canada and ECB will both chime in and expectations are high for further expansive monetary policy, to compliment fiscal stimulus and support.