Collinson FX Market Commentary- Mar 20 - Oil price lifts

by Collinson FX on 23 Mar 2015 Collinson FX market Commentary: March 18, 2015

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Mar 20 - Volitility continued, with equity markets jumping again, fueled by global QE. Monetary Policy is loose, in the extreme, and this driving equities and bonds higher. The currency wars are well under way, with monetary policy driving currencies lower, to gain trade sector advantage.

In Europe, Greece is negotiating an extension of the bailout, which will occur to avoid any disruption to the single currency and the ECB. Markets are starting to realise the interest rate rise in the US is some way off and thus have turned on the Dollar. The EUR trades 1.0800, while the GBP hit 1.4930, reflecting the weakness in the Dollar rather than any inherent strength in local currency units.

Oil moved north, with some recovery in commodity prices, as the reserve currency is allowing an anemic recovery. This boosted associated currencies, with the AUD jumping to 0.7770, while the KIWI hit 0.7540, with a rise in local Consumer Confidence. Global growth and inflation data will control Central Bank activity and speculation in the coming week thus driving markets.

Mar 19 - The Fed remained the major driver of markets direction overnight. Yellen removed the word 'patient' from the commentary while leaving rates unchanged. She observed that the US markets were performing well and the strong Dollar had kept a lid on inflation allowing less pressure for an interest rate rise. She also observed that this had impacted the trade exposed sector and questionable employment data. The extended expansive monetary policy was due to the GFC (which is now 7 years ago!!) which begs the question about a return to normalcy.

The Fed cannot raise rates and servicing the debt would break the budget. The Fed must also realise the futility of confidence in the statistical data surrounding Employment and Inflation. These are the key economic drivers in monetary policy and statistical measurement cannot be believed. Thus liquidity remains at record levels driving equities and bonds. Equities jumped and the Dollar slipped across the board.

The EUR broke back above 1.0600, while the GBP traded 1.4750, despite economic data remaining weak. Oil dropped below $43/barrel reflecting contracting global demand for commodities. The associated currencies reacted accordingly, with the AUD breaking above 0.7700, while the KIWI moved above 0.7430. Monetary Policy and Central banks will continue to drive markets with little prospect of rate rises in developed markets.

A look at GDP in the NZ markets may not inspire, despite much activity in the 'rebuild', with monetary pressures hitting growth. The NZD currently trades 0.6910 and 0.5000 against the EUR and GBP. The NZDJPY cross failed to break 90.00 but still trades strongly at 89.60.

Collinson FX market Commentary: March 18, 2015
Mar 18 - Equity markets drifted lower overnight due to positive economic data triggering speculation that the Fed may move towards interest rate rises.

EU and German ZEW sentiment reported a rise and EU inflation was higher, giving a reason to believe in a growth scenario, thus markets retreated. The EUR tested 1.0600, while the GBP meandered around 1.4750. Commodities were uninspired by demand, with prices drifting, giving little impetus to the associated currencies.

The AUD continued to look inhibited, trading just above 0.7600, while the NZD was testing 0.7300 on the downside. All eyes remain on the Fed's rate decision tonight!

Collinson FX market Commentary: March 17, 2015
Mar 17 - Markets continued to operate on speculation of Central Bank activity, in particular the Fed, who meet this week for a rate decision Wednesday (NY time).

Rumours that Yellen may remove the word 'patient' from her commentary have encouraged speculation over interest rises sooner rather than later. Economic data releases have only excused any impending action. Oil has dropped below $44/barrel which is indicative of the demand for commodities. A rise in US interest rates will drive equities lower and the Dollar higher but today the opposite is happening.

The fall in the Dollar was reflected in the EUR, which jumped to 1.0590, while the GBP moved up to 1.4835. US Industrial and Manufacturing data slipped lower and was confirmed by a weaker Empire State Manufacturing report. Australian New Vehicle Sales jumped 2.9%, as the currency clawed back to 0.7640, boosted by a flagging reserve.

The KIWI also booked gains, moving back to 0.7370, reflecting USD weakness rather than any domestic positives. The NZD Currently trades 0.6960 and 0.4965 against the EUR and GBP, little changed from yesterday.

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