Collinson FX Market Commentary- Nov 27 - NZD impacted

by Collinson FX on 27 Nov 2014 Collinson FX market Commentary: November 27, 2014

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Nov 27 - US markets were bumping along, testing highs, with some indifferent and mixed economic data released overnight. US Housing remained positive, with both New Home Sales and Pending Home Sales rising, but below expectations. The important Durable Goods Orders were positive but Consumer Confidence contracted. There appears to be no 'launch button' to break through the current levels of malaise, despite rising confidence.

Doubts remain and the recent action of Chinese and European Central Banks reinforce this! The GBP managed to book further gains, rising to 1.5780, after GDP numbers confirmed a steady rise of around 3% growth annually. The EUR is again testing 1.2500, after sinking to almost 1.2300, but does not inspire a great deal of confidence. RBA 'jawboning' has lead to further degradation of the currency, although a slight recovery overnight, allowed a rise to 0.8530. RBA observations of 'sharp declines in important commodity prices not been sufficiently translated into the currency' has lead to steep recent declines. The AUDUSD has hit 4 year lows and looks to some arrest, in the collapse of iron ore prices, before a floor can be found.

The NZD has been impacted by weaker commodities (mainly dairy) but not to the extent of its ANZAC partner. The KIWI trades back towards 0.7900 while the cross has spiked north. China remains crucial to commodity demand and all signs point to a slowing in demand. Central Bank activity and commentary remain important but are reactions to weak economic activity. Fundamentals appear to be on the improve but all may not be as it seems.

The NZD currently trades 0.6282 and 0.4978 against the EUR and GBP, little changed in a volatile night of trading. The big mover over night was the NZDAUD cross, pushing through 0.9200 on AUD weakness.

Nov 26 - Equities remained steady in Europe and the US with improving growth prospects and support from Central Banks in China, Japan and Europe. US GDP jumped to to 3.9%, building on previous sizable gains, driving the Global markets. Housing in the US was treading water, while Consumer Confidence unexpectedly fell. German and EU GDP also showed signs of life, pushing in to the positives, supported by ECB Monetary Policy.

Chinese interest rate cuts have been digested by markets and point to fundamental economic problems. The commodity hungry economy is in 'slow down mode' and this hits the providers of those commodities hard. The AUD has dropped back to four year lows, falling below 0.8600, a more than 50% retracement from technical highs. The AUD is under siege and the KIWI has been infected, now testing 0.7800, on the downside.

A recovery in Chinese demand is the tonic required by commodity currencies. US strength may boost Europe and global demand, impacting China, and thus the dependent economies. The NZD trades 0.6235 and 0.4952 against the EUR and GBP this morning, down significantly on yesterdays levels. The NZDJPY remains historically strong but trades down a little at 91.70, still great buying

Nov 25 - Markets drifted in mixed trade with little in the way of economic releases overnight. The initial burst of confidence flowing from Central bank activity from China and jawboning from Europe. ECB President Draghi committed to 'raising inflation as fast a possible' through Monetary Policy and called on fiscal action from member nations.

The important German IFO reported improving business confidence which boosted the much maligned EURO. The single currency bounced to 1.2430 while the GBP jumped to 1.5700. These are likely dead-cat bounces as the EUR drifts towards 1.2000! Commodity currencies gave up some of last weeks gains, with the KIWI falling back to 0.7850, while the AUD was the big loser.

The AUDUSD fell to 0.8615 impaired by the reality of the Chinese interest rate cut. The cut was due to a slow down in Chinese economic activity and thus slower commodity demand. Economic data releases will increase tonight so be prepared for more activity in the coming days. The KIWI currently trades 0.7835, down on yesterday.


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