Collinson FX Market Commentary- May 1 - Rate cut looms next week

by Collinson FX on 1 May 2015 Collinson FX market Commentary: May 1 2015 - Rate cut looms next Click here to find out how to get CollinsonFX's free iPhone app

May 1 - The Fed's language is changing with the departure from referencing a time for interest rate rises. This confirms the deteriorating economic conditions and reinforces speculation that it will not happen this year! This hit the Dollar, with the EUR rising to 1.1250, while the GBP hit 1.5350. German Retail Sales contracted and EU employment and inflation were flat, questioning the value of the ECB's QE. This was further exemplified by the contradictory direction of the single currency.

The RBNZ failed to cut rates and jawboned the currency lower. The KIWI fell to 0.7600, but consolidated and rallied, when markets realised that the interest rate differential remains. This should continue to drive the NZD up, enhanced by a weaker reserve,exasperated by an incompetent Governor.

The AUD was also hit overnight, with speculation the RBA will cut interest rates next week, reducing their own interest rate margins. The AUD dropped to test 0.7900, on the downside, despite a falling USD. The Bank of Japan confirmed their own record QE, ensuring the global currency wars go forward, with the obvious exception of a major global player ..New Zealand!?

Collinson FX market Commentary: April 30 2015 - Will the Euro canary sing?
Apr 30 - The canary is finding its voice in Europe, with warning lights beginning to flash, in the form of bond yields. German CPI contracted, reflecting the growth status of the European engine, while CPI rose in the 'Med' members. The phenomena of rising inflation and bond yields in the 'Med' states point to problems in the heavily over-indebted nations.

These countries are the problem, with debt levels at tipping point, while the ECB directs QE to reduce relative values of the currency. The real problem lies in the USA, which was thought to be in a strong economic recovery, but economic data has not vindicated this. GDP growth screeched to a resounding halt, falling to just 0.2%, confirming the Feds worst fears. The promised return to normalcy has been long forgotten replaced with hollow rhetoric.

The FOMC meeting revealed the intention to raise rates but economic data has not supported honorable intentions. The EUR reflected this, surging to 1.1110, while the GBP pushed up to 1.5450. This will not enable a trade based recovery which has been the source of revenue problems from corporate America.

NZ business confidence is losing momentum in the face the RBNZ interest rate decision today. Expectations are high for a cut in the reserve rate. Failure to act will confirm the ineptitude of the current Governor.

The NZD traded below 07700, despite the promise of a rate cut, while the AUD is again testing 0.8000. Central Banks remain firmly in control of currency markets and the RBNZ may finally face reality today!

Collinson FX market Commentary: April 29 2015 - Cash rate cut expected

Advanced economies are drowning in money as global printing presses run hot! The avalanche of liquidity has lead to corrupted markets, with equities booming, currencies distorted and commodites reflecting demand constrained by a weak reserve. Promises of a return to normal monetary policy in the US, as economic conditions improve, have fallen by the wayside.

Economic data has been weak and now corporate earnings are being impacted. US Consumer Confidence plunged overnight, reflecting the dire state of the all important consumer, further dampening prospects of a return to normal interest rates. This was reflected in the Dollar, with the EUR surging to 1.0980, while the GBP jumped to 1.5325 despite weaker than expected GDP growth. Commodity prices have been boosted by weak reserve measurements rather than rising demand and therein lies the problem.

The associated currencies reflected recent moves, with the NZD moving back above 0.7700, while the AUD soared back towards the big number 0.8000.

Locally expectations are for the RBA and RBNZ to cut rates, joining the global currency wars, but ignored by markets as the Dollar phenomena overwhelms all. Australian Consumer Confidence has been on the rise, while NZ Trade numbers are set to reveal a surge, due to recent currency falls. Attempts by the local Central banks may be overpowered by stronger inactions in the Fed.

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