Collinsonfx Daily Market Commentary

US equity markets crashed overnight, amidst internal political pressures and growing fears over the potential impact on the domestic economy, of an extended trade war with China. There was little on the economic data front out overnight, so markets focused on the decline in Manufacturing as outlined in the ISM Manufacturing index. The ADP Private Sector Jobs report was steady, as US employment remains at record highs, but weakness on the manufacturing front is showing signs of  economic deterioration. US/China trade talks resume next week and there is growing hopes for a positive outcome, but speculation over the impact on global growth, has struck fear into markets. German GDP forecasts were reviewed lower for 2020, back down to 1.1%, with the major risks cited as global growth, trade and Brexit. The Engine-room of Europe may well fall into recession and Brexit will only add to their problems. The decline in US bond yields forced the Dollar lower, with the EUR rising to 1.0950, while the GBP regained 1.2300.

The weaker reserve offset the impact of the negative sentiment surrounding the US/China trade war, with the AUD attempting to hold 0.6700, while the NZD trades around 0.6250. NZ House Prices rose slightly but a string of weak economic data has overseen the decline in the currency. The US/China trade negotiations need to see significant results, for these commodity currencies to stabilise, let alone regain some mojo. Local Central banks are indicating further rate cuts, which will only undermine the currencies, in an effort to combat the impact of trade losses. They are playing a significant role in global currency wars.