Collinson FX Market Commentary- Mar 24 - Kiwi wins beauty contest

by Collinson FX on 24 Mar 2015 Collinson FX market Commentary: March 24, 205 - Kiwi wins beauty contest

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Mar 24 - Equities continued to live off the Feds reluctance to raise rates with flows in to equities and bonds. Fed member Fisher, commented that 'interest rate rises may be warranted by year end'! Any commentator and student of the Fed would realise the emptiness of their rhetoric.

US and Global economies are not growing at a great pace and inflation is benign, accordingly. There is no pressure to raise rates and in fact many that support interest rates at record lows. The massive expansion of monetary policy is an attempt at stimulating deflationary, indebted economies. The other dominating pressure is the levels of indebtedness, fueled by enduring deficits, driving debt much higher than the pre-GFC levels.

The servicing of the debt is manageable only because interest rates are so low. If interest rates rise, then default for many, would be the only option. The realization that the Fed will not raise rates is filtering through to equity markets which continue to bloom.

The Dollar is also collateral damage, with the EUR rising to 1.0940, while the GBP trade 1.4940. Commodity currencies also booked big gains with the AUD rising to 0.7870, while the KIWI surged to 0.7650! The NZD Dollar is extremely attractive, as economic conditions are marginally less benign, while interest rate differentials provide massive incentive. Expect economic data to translate into Central Bank activity and commentary which control market direction.

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