by Collinson FX
Collinson FX market Commentary: July 2, 2014
Scott McKenzie - Day 5, 2014 Toyota Optimist Championships, Manly SC
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The DOW surged towards the record all-time high of 17,000 with little in the way of fundamentals to support the vastly overstretched bubble. Co-ordinated Central bank action (notable exception of Wheeler in Wonderland!) globally has caused the massive flow of liquidity into shares with little to attract in the bond world.
Chinese Manufacturing PMI inched north and boosted the commodity currencies. The RBA left interest unchanged and confirmed moderate growth required interest rate stability. Commentary on a rising AUD was not desired especially considering weaker commodity prices. The AUD broke back above 0.9500 confounding the Central Bank and hitting the trade sector. The KIWI continues to flourish, moving to 0.8775, cheered by the RBNZ, hitting the domestic and trade exposed economy hard.
European PMI dipped lower while employment remained steadfastly high. The disfuntional single currency turned south again, trading 1.3675, while the economy remains in intensive care. The GBP is now showing the benefits of remaining outside the catastrophe-zone, moving back to 1.7150. In the US, the Fed is the only reason equities move into dreamworld, with nothing on the economic fundamental front to support the rise.
The ISM Manufacturing contracted and employment growth is largely due to low participation. GDP is back in contraction and without developments, on the energy front, the US would be heading into the doldrums. Equity markets should be sending jitters through markets but the bulls are burning! Painful to be short but you would not want to be long!
2014 Optimist Nationals, Manly Sailing Club
Collinson FX market Commentary: July 1, 2014
Equity markets are bubbling along on record highs but appear nervous with Geo-Political issues tearing up the Middle East and threatening central Europe. European economies remain flat and certainly a threat, to any concerted global recovery, despite Central bank activity. The slow recovery in Europe has been highlighted by continued deficits adding to mountainous debt levels threatening the very nature of these states.
Debt is out of control and any rise in interest rates would destroy most economies with debt servicing alone. This applies to the USA, which is accumulating a European style debt, as Obama drives them into a European socialist style economy. Central Banks will ultimately lose the battle to inflation, as supply finally overwhelms demand, exploding Bonds prices will be confirmation. The Dollar is under assault from the Fed and is collapsing across the board!
Even the doomed EUR booked gains, to trade 1.3690, while the GBP surged to 1.7100. The AUD also managed to improve, with the falling reserve, rising to 0.9430. NZ Building Permits contracted 4.6% and Business Confidence plunged to 42.8 from 53.5.
The 'rock star economy' has hit the wall as collateral damage from RBNZ policy. Wheeler has embarked on an aggressive monetary policy to raise rates in an effort to combat inflationary pressures and fight the real estate bubble in Auckland. He has succeeded in slowing economic activity, by raising the cost of capital and boosting the KIWI, which has been a body blow to the all-important trade sector.
The NZD rallied to 0.8750 and looks set for further gains with interest rate differentials providing the sugar. All eyes remain on Central Bank activity globally and important Jobs data out of a shortened week in the US.
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