Market Commentary – September 21, 2020

Kevin Jock

21st September 2020

    A lack of optimistic news ended Fridays’ session risk-off as global indices continued to slip. Investors remained watchful over the weekend amid a persistent virus pandemic, rising geo-political spats between China versus the world and U.S. election risk as rhetoric between both parties intensify. Asia’s off to a mute start with Japan on holiday, embracing Respect for the Aged Day.

    Mixed results left the U.S. dollar index relatively unchanged against G10 currencies. Yuan retreated as China kept the lending steady for 5 straight months. Hong Kong Monetary Authorities sold another 3.31bn HKD in defending the lower 7.75 band. Elsewhere, the consolidation in gold continues to tighten whilst Bitcoin settles above the 10,000 level.

    Recovery in crude oil prices was halted on Friday as news of inventory gluts and lackluster global demand grabbed headlines. China, the second largest oil import is expected to cut imports by 10% for the coming month. While recent data out of U.S. sees fuel consumption down 13% year on year. News of Libyan oil fields restarting production further added to the headwinds.


Figure 1 (Source: Refinitiv): USDTHB Daily – Thai Baht at crossroads with the economy bottoming out and set to improve. COVID related risk have seemingly been priced in till years end.


    On the coronavirus front, worldwide cases totaled 30.9M with deaths amounting to 959K. U.S. deaths inch closer to 200K with heath experts expecting at least one more wave. Since September daily cases in the U.K. has been on a parabolic increase. Health secretary Matt Hancock warned citizens to brace for new national restrictions as P.M. Boris Johnson implemented fines up to $10K for citizens breaking self-isolation rules whilst London major Sadiq Khan considers reducing pub hours and banning household mixing in the capital. Similarly European nations Demark and Greece announced stricter measures attempting to curb hotspot cases in some of their largest cities.

    For the week ahead, central banks in New Zealand and Thailand will meet on Thursday with both authorities expected to keep policy rates unchanged at record lows 0.25%. Likewise, Turkish banking members will deliberate on Thursday, expected to keep repo rates at 8.25%, despite USDTRY continually settling at record highs for 3 consecutive weeks. Market consensus sees Mexico cutting for the 11th time, with rates set to lower to 4.25%.

    In other news, Federal Reserve Chairman Powell will testify before the House Financial Services Committee on Tuesday, Wednesday, and Thursday. Expected to face questions in relation to America’s economy, COVID-19 and stimulus. BOE’s Governor Andrew Bailey will also speak online at the British Chambers of Commerce on Tuesday as he lays down the groundwork for negative rates with the Prudential Regulation Authority by the end of the year.

Headliner to Review

  • Mixed retail sales result out of U.K and Canada. U.K. numbers declined from 3.7% to 0.8% whilst Canada disappointed posting a -0.4% contraction in the sector. Home improvement and Household goods continued to be in demand by Brits whilst the same category weighed down Canadian core retail sales.
  • The US Prelim UoM Consumer Sentiment rose to 78.9 in September, compared with 74.1 in the prior month. It was better than the expectation 75.0. The recent gain was consistent with flat trend. However, it is believed that the election would have an impact on expectations about future economic prospects.

Headliner to Watch

  • Three FOMC members are due to speak today
    • Fed Chair Powell alongside FOMC member Lael Brianard will discuss the Community Reinvestment Act in ensuring sufficient credit liquidity is accessible to those in low- and moderate-income neighborhoods in a time of crises.
    • FOMC member John William is participating in a virtual panel discussion titled “Economic Justice: Examining the Financial Burdens of Inequality and Striving for an Equitable COVID-19 Recovery”

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Antony Tan
Ben Li
Kevin Jock