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Global growth fears remain the major issue influencing markets, triggered by the escalating US/China trade war. China has reacted to further US tariffs by devaluing their currency and threatening to halt all US agricultural imports. This tripped a major sell-off in equity markets and a collapse in bond yields. Oil prices fell and the price of gold soared. The RBNZ surprised markets by cutting rates by 50 basis points, although a 25 point cut was expected, sending the currency into free-fall. The NZD plunged to below 0.6400, in local trade, but rebounded in overnight trade, to rise above 0.6450. The AUD was also impacted, falling below 0.6700, but later recovered to 0.6760. These commodity currencies are seen to be major victims of the US/China trade war, because of their heavy dependence on the Chinese market, for the sale of their goods. The breakdown in the existing supply chain, will be detrimental to these currencies and their respective economies, although any US agriculture embargoes may be replaced by these suppliers.
India and Thailand both joined the RBNZ and cut rates, following the recent Fed rate cut. The RBNZ Governor promised more actions, if necessary, giving a dire warning to NZ economic market watchers. US Bond Yields continued to unwind, with the 10 Year yield falling to 1.66%, while Gold has spike to US$ 1,517. Global demand has pushed oil prices to US$51/barrel. Close attention must be paid to trade data and commodity prices to watch this scenario play out. The EUR was steady, trading 1.1210, while the GBP holds 1.2150.
Volatility remains high in global markets. … read more
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