by Collinson FX
Int. A-Class Catamaran World Championship, Day 5, Takapuna NZ
Collinson FX market Commentary: March 19, 2014
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A wide ranging historical speech by Russian President seemed to alleviate fears surrounding the Ukraine and allowed risk appetite to flood back into equity markets. Markets interpret the Geo-Political pressures relented and allowed markets to consider economic data and Central bank activity. The speech appeared to announce the lack of enthusiasm to split the Ukraine, although he did just this, by announcement of Crimean integration into the Motherland.
It seems he may avoid a split by integrating the whole of the Ukraine! The surge in Equities allowed a boost to the EUR as the USD slips ahead of the FOMC announcement. The fall in the Dollar seems to indicate a halt to tapering although most market pundits assume Yellen will continue.
The GBP bucked the trend, with Bank of England commentary signalling record low interest rates and easing monetary policy, allowing the currency to drop back to 1.6585. In contrast the EUR surged to 1.3925 but remains vulnerable ahead of the 1.4000 mark.
RBA Minutes may signal an end to interest rate cuts which added momentum to rises from a weaker Dollar and improved risk appetite. The AUD rallied to 0.9130 and the KIWI surged to 0.8625. The interest rate differential remains attractive, driving the commodity currencies north, but they remain extremely exposed to a shift in uncertainty, driven by issues in the Ukraine.
Collinson FX market Commentary: March 18, 2014
Geo-Political developments went as expected, with a landslide vote in Crimea to join Russia, away from the Ukraine. The Ukrainian revolutionaries, who overthrew the elected Government, have lost the Russian minorities and are now looking for support from the Motherland.
This referendum went as planned, removing some uncertainty, and markets reacted accordingly. The focus moved to markets and US Industrial and Manufacturing production improved, in the lead up to tomorrows FOMC, two day meeting.
Yellen has indicated that tapering should continue unless there is a serious deterioration in US economic conditions. This will boost confidence, although a suspension in the reduction in stimulus, should continue to inflate the equity bubble.
The EUR broke above 1.3900, giving some validity to possible extension of QE Infinity, and allowing the GBP to hold 1.6630. Risk appetite rose, giving support to the AUD, which is testing 0.9100 dragging the KIWI to 0.8540. These currencies will continue to trade risk and uncertainty with Geo-Political developments in the Ukraine, will continue to dominate markets, with little likelihood of a solution in the near future.
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