Collinson FX Market Commentary - Nov 25 - Quiet 'Black Friday'

by Collinson FX on 25 Nov 2017 Collinson FX Market Commentary - Nov 25 - Quiet 'Black Friday'

Nov 25 - US markets were closing for a very quiet 'Black Friday' trading day. Equities closed around record levels, with high expectations for Retail Sales, on the biggest trading day of the year. The EUR continued to rally strongly, moving up to 1.1925, while the GBP jumped to 1.3333.

Commodity currencies took heart from a flagging reserve, with the AUD breaking back above 0.7600, while the NZD pushed above 0.6850. A slew of global economic data releases, in the coming week, headlined by US GDP and the release of the Fed's Biege Book. It has been a massive year for US equities, hitting new record highs, fuelled by the 'Trump Effect'! Tax reform in the US, is essential, to consolidate for the coming year.

Collinson FX Market Commentary - Nov 24 - Thanksgiving begins

Nov 24 - Thanksgiving weekend kicked off in the US and markets reacted accordingly. There will be no action until the new week unless there is a massive Geo-Political event. The Fed minutes were released, confirming growth fears, although certainty surrounding next months rate rise remain. German GDP remained steady, while Trade data confirmed expansion in both exports and imports, allowing EU economic progress to continue.

The EUR jumped to 1.1850, while the GBP hit 1.3300, despite marginal GDP growth. The flagging reserve allowed a further recovery in commodity currencies, with the AUD breaking back above 0.7600, while the NZD pushed towards 0.6900. Markets will remain static, until the holidays are over in the US, although Retail Sales over Black Friday always become a focus!?

Collinson FX Market Commentary - Nov 23 - Brexis budget delivers deficits

Nov 23 - US markets slowed ahead of the long Thanksgiving weekend. Durable Goods Orders contacted 1.2% and the Fed Minutes are the last major economic event before the holiday. Yellen has warned of a dampening in inflation and growth prospects, which undermined the strength in the Dollar, with all eyes on the December rate rise. A rate rise has been built in to markets and any doubt in the minutes would upset markets.

The Dollar rally has expected a rise in rates and any loosening in monetary policy would severely impact the currency. The EUR pushed back to 1.1800, while the GBP surged towards 1.3300, despite a downgrade in growth prospects in the UK Budget.

The latest budget tempered growth prospects, recognising the impact of 'Brexit', delivering massive budget deficits and record debt. The budget addresses economic challenges and relies on fiscal latitude, rather than spending cuts or tax rises. Political cowardice reflecting a weak minority Government.

The sliding reserve accounted for a rally in commodity currencies. The AUD jumped to 0.7580, while the NZD rallied to 0.6850, awaiting local, NZ, retail sales. Plan for very quiet markets over the long Thanksgiving weekend.

Collinson FX Market Commentary - Nov 22 - Australia locks in low-rates

Nov 22 - Equities rallied to record levels, once again, ahead of the Thanksgiving long weekend in the US. The rally is firmly contingent upon tax reform which now comes down to the US Senate. US Existing Home Sales jumped 2%, confirming the stream of strong economic data, as confidence remains at record levels. The EUR held 1.1750, while the GBP quietly pushed up to 1.3230, ahead of the interest rate curve.

RBA statements have locked in low-interest rates for the foreseeable future. The current environment is being hampered by low wage growth, rising debt levels and a housing bubble. The scenario of low wage growth, low inflation, low-interest rates and high asset prices is a trap for the RBA. They cannot cut rates as this would antagonise debt levels and house prices.

The AUD pushed back up towards 0.7600, while the NZD consolidated above 0.6800. The inability of Central Banks to tighten monetary policy condemns economies to the current economic environment. Low growth does not prevent prices rises and restricts disposable income.

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Collinson FX Market Commentary - Nov 21 - Thanksgiving and Black Friday

Nov 21 - This is a shortened week in the USA, with Thanksgiving on Thursday, resulting in many having an extra long weekend and 'Black-Friday' sales. The focus in Europe was commentary from the ECB. President Draghi endorsed the need for accommodative monetary policy to improve the labour market and lift badly flagging wage growth.

The EUR drifted to 1.1730, while the GBP surged to 1.3240, which is ahead of the interest rate cycle. US markets remain focused tax reform, which has passed the House of Representatives, but needs to pass the Senate!?

RBA representative, Kearns, was out publicly commenting on Foreign investment. The RBA has attempted to slow Chinese investment in the residential market, while maintaining badly needed capital investment. It is a fine line to walk. The AUD slipped back to 0.7535, mired in political turmoil, while the NZD battles to hold 0.6800. The Labour Party in finding Governing a lot harder than anticipated and many of their populist idea logical promises are becoming reality challenged.

Collinson FX Market Commentary - Nov 20 - KIWI set to drop below .68c

Comments from ECB's Draghi warned of a need for patience with monetary policy as inflation remains subdued. The ECB has been bullish on growth, which have driven markets higher, but inflation reflects growth and this has been benign. Despite this the EUR managed to hold 1.1780, while the GBP regained 1.3200, driven by stronger inflation/growth data.

The GBP is destabilised by Brexit trade talks. The coming week will be interrupted by the US Thanksgiving holiday on Thursday and a relative slow economic data release period. The soft Dollar failed to add any fortitude to commodity currencies with the AUD falling to 0.7550, while the NZD looks to test below 0.6800.

These Trans-Tasman currencies are testing important technical levels and look set for further vulnerabilities. The Australia political situation is causing massive instability with threats to ruling parties. The NZD is being threatened by the new rainbow coalitions lack of policy certainty and some tentative missteps. Warnings of fiscal blowouts never encourage market confidence.

Collinson FX Market Commentary - Nov 17 - NZ Confidence drifts lower

Nov 17 - Equity markets rebounded strongly across the globe after some recent weakness. EU CPI was flat, in line with recent data, which green lights extended the ECB's expansive monetary policy. In the US Tax reform is being passed in the House, filling markets with confidence, although the stumbling block for legislation has been the Senate. This is essential to support the rally in markets.

US Industrial and Manufacturing Production both showed signs of improvement. Global economies are showing stronger growth prospects while inflation remains benign. The EUR was steady, trading 1.1770, while the GBP approaches 1.3200 after stronger Retail Sales.

The AUD holds under 0.7600, but the currency is vulnerable due to political instability, rather than economic.NZ Consumer Confidence drifted lower, reflecting the soft conditions in the NZ political environment, allowing the NZD to slip to 0.6850. Australian Employment numbers were lower, although the headline number improved, from 5.5% to 5.4%. The Labour market remains strong but will not deter the accommodative monetary policy from the RBA.

Collinson FX Market Commentary - Nov 16 - NZ House Sales drop

Nov 16 - US Markets are tightening awaiting the outcome of the looming tax legislation due before congress in the next week. The equity rally is dependent on the passage of the tax cuts and failure would cause devastation in the markets. US CPI was lower, 0.1% from 0.5%, while Retail Sales were flat.

This did little for the Dollar, as the EUR surged towards 1.1800, while the GBP traded around 1.3150. Japanese GDP drifted lower, while Industrial Production contracted, spelling from strong recent economic performance. The commodity currencies remain under pressure, with the AUD dropping below 0.7600, amidst the political chaos surrounding Parliament.

NZ House Sales fell 15.8%, following substantial previous losses, revealing confidence issues and Government policy stances in the key sector. The NZD weathered the news, trading below 0.6900, but remains vulnerable.

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Collinson FX Market Commentary - Nov 15 - AUD slides in chaos

Nov 15 - German GDP data came in higher than expected, while CPI inflation data was flat, which confirmed statements from the ECB regarding the economic situation in the EU. Growth is improving, while inflation remains low, which is a desirable position on the surface. The German and EU ZEW Economic Sentiment report reflected the current situation, and this was reflected in the currency.

The EUR jumped to 1.1780, while the GBP traded 1.3170, as CPI data drifted but remains strong enough to encourage tightening monetary policy from the Bank of England. Chinese Retail Sales drifted lower, while Industrial Production was flat, which did little to support commodity prices.

The AUD slipped back towards 0.7600, mired in political chaos, while the NZD drifted back to 0.6850. Japanese GDP numbers and Australian Consumer Confidence data may influence local markets today.

Collinson FX Market Commentary - Nov 14 - Oz Government under siege

Markets opened the week quietly, with little economic data being released, globally. The focus in Europe fell upon a speech from ECB VP Vitor Constansio, who lauded the actions of the ECB, post-GFC. He pointed out the rising growth and flat inflation citing, a 'broad-based, robust and resilient recovery' but admitted it was not 'self-sustained' and required further accommodative monetary policy.

He must be admired for the optimistic view of an economy that has struggled over the 10 years since the GFC. The EUR traded 1.1650, while the GBP slipped to 1.3120, reflecting a steady reserve. In the US, attention remained on the prospects of tax-reform, which is in the balance.

The AUD drifted to 0.7620, with chaos reigning in Canberra, as the eligibility issue spirals out of control. The Government is under siege and the instability is not inspiring confidence in markets. The NZD slipped back below 0.6900, a reflection of the reserve, rather than any local events.

Collinson FX Market Commentary - Nov 13 - Swamp committed Trump failure

Global equity markets continued to drift lower, as substantial US Tax reform, became less likely. The US congress has diluted any substantial tax reform and is not likely to pass even that. The US Treasury Secretary has warned of a massive correction in markets, if Congress fails to do their job, which is likely. Trump has done all he can, by executive order, but the swamp is committed to his failure.

UK Industrial/Manufacturing Production was strong, in line with recent data releases, despite recent doomsday predictions. The GBP regained 1.3200, while the EUR pushed back to 1.1650, with the reserve suffering under tax reform complications. The NZD failed to hold the recent rally, drifting back to 0.6900, while the AUD traded around 0.7650. Political complications surrounding the 'eligibility issue' threaten the Government in Australia and uncertainty is bad for currencies and equities.

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