Collinson FX Market Commentary - June 19 - Greek crisis deferred
by Collinson FX on 19 Jun 2015
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June 19 - The Greek crises reached critical with no agreement and default looming. European leaders called an emergency summit for Monday to avoid imminent default. This was enough to defer any major market collapse, while US markets in fact surged, with the NASDAQ hitting new records.
The EUR traded 1.1375, while the GBP jumped to 1.5880, boosted by strong Retail Sales. US equity markets rose sharply after the averted crises in Europe and some stronger than expected inflation data. US CPI rose 0.4%, moving out of the contractual phase of recent times, hinting GDP growth may rebound. The AUD/USD edged closer to the 0.7800 level, with the KIWI plugging to 0.6950, pushing the cross back below 0.8900!
NZ GDP growth tumbled 0.2% pushing annual growth back to 2.6%. This explains the Central Banks recent cuts and probably translates into further. Wheeler has been miles behind the curve, considering all major trading partners, deserving much of the blame for the economic slowdown.
This will put downward pressure on the NZD boosting terms of trade and lowering cost of capital. This should boost investment, lowering borrowing costs, increasing consumer confidence. The question is why not years ago when all other developed countries were acting? Q
uadruple witching day tomorrow may bring volatility to US equity markets but all eyes remain on Europe.
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Collinson FX Market Commentary - June 18 - KIWI below 70c
June 18 - The Fed left rates unchanged with Yellen referring to a 'gradual rate rise'! This is exactly what will happen, but the question is, when? GDP data and inflation will confirm any reticence the Fed may have had, meanwhile global growth ensures no immediate action, despite telegraphs! The Greek situation will be deferred, thus remaining an issue, debasing Europe and global markets.
The Feds lack of action allowed the EUR to jump to 1.1350, while the GBP spiked to 1.5835, in spite of anaemic economic data.
Commodities were mixed, but the flagging reserve caused the AUD to hold 0.7750, while the NZD remained below 0.7000. Inaction by the Fed will pressure movement in the reverse direction from the RBA and RBNZ. The NZ Reserve Bank has more room to move due to dilatory actions over the last few years!
Collinson FX Market Commentary - June 17 - Greek inaction continues
June 17 - European equities wallowed, struck by inertia, from Greek inaction. The Greeks are refusing to budge while European authorities threaten financial repercussions. There has been a further run on local banks, which are now being supported by ECB cash, with the locals preparing for a possible exit. European Finance Ministers will reach a compromise Thursday, but there is an outside chance of default, so markets must be ready.
US Markets regained yesterdays losses, ignoring continued Greek volatility, focusing on local economic data. The Fed meeting began, with little expectation of action, with last quarter contraction in GDP growth and mixed Manufacturing and Housing data. The GBP traded 1.5650, while the EUR slipped to 1.1240, after ZEW Sentiment data weakened further.
The AUD drifted lower despite improving Consumer Confidence. RBA Minutes reflected concerns over the burgeoning housing market, due to low interest rates, but recognised the low rates were required to boost investment and lower pressure on the AUD.
The AUD dropped to 0.7730, while the NZD fell below 0.7000, with trade data out this morning having a minor impact. Currencies remain under the jurisdiction of Central Banks with local economic data having short term impact.
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Collinson FX Market Commentary - June 16 - Greek debt talks abandoned
June 16 - Greek debt negotiations lasted just 45 minutes, in Brussels, when parties broke and abandoned talks. The Finance Ministers meeting at the end of the week is now the conduit to agreement. This could be the last chance before Greek default, as opposed to voluntary default, already played as a card in the game.
The Fed meet tonight for their two day meeting and are not expected to touch interest rates but may indicate a move for September.
The Greek situation remains highly unstable, which does not allow confidence to blossom, in a challenging environment. US Manufacturing and Industrial production, both missed expectations, adding to the lack of pressure on Fed rate rises.
The EUR hit 1.1280, while the GBP broke back above 1.5600, with advantages over Europe. Commodity currencies were solid, with a weaker reserve, but will be equally unstable in the face of Greece and the FOMC meeting.
The NZD is trying hard to regain 0.7000, while the AUD moved up towards 0.7770. Economic data will influence currencies in the lead up to the FOMC and Greek debt negotiations.
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