Collinson FX Market Commentary - Oct 31 - Statistical mirages

by Collinson FX on 30 Oct 2015 Collinson FX Market Commentary - Oct 31 - Statistical mirages Click here to find out how to get Collinson FX's free iPhone app
Collinson FX Market Commentary - Oct 31 - AUD crashes
Oct 31 - Equity markets reflected a weak global economy despite the Feds interpretation of events. The indications have been that the Fed will raise interest rates for the first time since the GFC, on the provision that employment remains strong, while inflation resumes some normality. Neither of these things will occur, in the real world, although statistical mirages may support.

EU CPI was zero, confirming deflationary pressures, with slow growth. EU Employment is heading towards 12%, but this should be enhanced by the flood of refugees, which will probably be accounted for in a Non Employment category. EU Retail Sales were zero, giving a definitive pattern of failing economic activity, contradicting Central Banks.

It is hard to see a change in Monetary Policy in the U.S. or Europe, while Australia and NZ have room to join the currency wars. The U.S. dollar has reflected the lack of faith in the Fed, with the EUR climbing back towards 1.1000, while the GBP broke above 1.5400.

Commodity prices remain weak but consolidated allowing the associated currencies to stabilise. The AUD pushed back above 0.7100, while the embattled NZD traded 0.6770, looking towards a massive week of global economic data.

Collinson FX Market Commentary - Oct 30 - Rally runs out of steam
Oct 30 - The rally in the Dollar, after the Fed indicated a rate rise in December, ran out of steam overnight as markets digest the future. The EUR traded 1.0950, while the GBP attempted to regain 1.5300, as equities slipped. The Feds bullish commentary, due to stronger economic circumstances, relies on strong Labour markets and normalised inflation. Labour markets are statistically corrupted and real Unemployment in most western economies is double figures. The real measures are looking at participation rates and these give a more accurate picture. Inflation has been non existent, despite record monetary expansionism, due to flat growth. This was again front and center in the U.S., with annualised GDP coming in at 1.5%, from 3.9%! This contradicts the Feds observations and is reflected in the weakening Dollar. The banal state of liquidity-impacted global currencies has lead to commodity currencies taking direction from the associated commodity prices. The AUD has been hit hard, trading below 0.7070, while the NZD holds under 0.6700. The RBNZ held interest rates, as expected, with commodity prices having the desired impact.

Collinson FX Market Commentary - Oct 29 - AUD crashes
Oct 29 - The Fed left rates unchanged, as expected, but intimated that they will likely raise rates in December. The intention surprised many and Bond yields immediately spiked with currencies. The EUR plunged to 1.0925, while the GBP dropped to 1.5260, as the reserve spiked.

The Fed sited a stronger labour market and improving economic conditions allowing the first interest rate rise since the GFC!? Commodity currencies were slipping lower and momentum was enhanced by the Feds language.

The AUD crashed below 0.7100, while the KIWI was trading 0.6640, with the RBNZ interest rate decision due later. This would reduce any pressure the RBNZ may have felt to further cut rates. The telegraphed rate rise will more than likely hit another major obstacle as the Fed look for an excuse to retreat from the brink.

Collinson FX Market Commentary - Oct 28 - Global economic slowdown
Oct 28 - Global equities slipped lower overnight due to mounting evidence of economic slowdown. U.S. Durable Goods Orders contracted by 1.2%, while conflicting news on the housing market, does little to settle. New Home Sales fell 11.5%, although Home Prices moved up 5.1%, sending mixed messages.

The Dallas Fed Manufacturing Activity also contracted 12.7%, confirming recent poor data, which may influence the Fed. The Fed is meeting today and set to announce their decision tonight but there is little danger of an interest rate rise.

The EUR held 1.1000, while the GBP traded 1.5350, after local GDP slipped to 2.3%. Commodities drifted but held ground in the face of a faltering reserve. The AUD dipped below 0.7200, while the NZD struggles at 0.6760, with local trade data deteriorating as exports drift and imports rise.

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Collinson FX Market Commentary - Oct 27 - The Ferryman must be paid
Oct 27 - Equities assumed their natural bias and slipped lower after a quiet open to the week on the economic front. Recent support for a European QE2 looks likely to pin the single currency lower, despite a concerted effort to undermine the Dollar, while China looks to join the currency wars.

The Bank of China has added further to expansionary monetary policy in an effort to remain competitive. Commodities and equities are lower, pushing the currencies in directions that may surprise, with a conundrum brewing. The EUR held 1.1000, while the GBP traded 1.5350, reflecting loose monetary policy.

The commodity currencies reversed recent losses, with the AUD moving towards 0.7250, while the NZD is heading back towards 0.6800! The bounce conflicts the move in commodities but reflects the losses sustained in global currency wars. We could now look to an interest rate cut on Cup Day from the RBA!?

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