Collinson FX Market Commentary - July 20 - Markets make full recovery

by Collinson FX on 20 Jul 2016 Collinson FX Market Commentary - July 20 - Markets make full recovery

July 20 - RBA minutes provided a great summary of global economic conditions and how they impact the Australian situation. The RBA considered the impact of the Brexit and recognised that markets were back to pre-brexit levels, except the GBP, which may be impacted by future trade prospects. The impact on the Australian economy was minimal, considering the minute trade between Europe and Australia (UK 3% of Exports and EU 4.5%!!!), which would surprise many.

The RBA observed global growth was moderate, while Employment remained firm as inflation disappointed. Local conditions were steady and growth was moderate, while exports drifted, impacting trade and employment. The summary was discouraging, with the AUD and Unemployment too high, while inflation and growth too low. This suggested a likely rate cut and immediately converted to the currency, which shed a big figure, after digestion.

The AUD trades below 0.7500, while the NZD is headed towards 0.7000, after LVR adjustments cleared the way for further RBNZ rate cuts. The Dollar booked gains, adding to downward pressures on commodity currencies, while the EUR slipped to 1.1000. The GBP fell to 1.3100, while the JPY moved to 106.20, as sentiment in Europe slipped according to ZEW surveys. Central Bank commentary and market speculation remains the major driver of markets and the internal discussions are fantastic insight to global conditions.

Collinson FX Market Commentary - July 19 - Brexit a boon for Brits?
July 19 - The tumultuous weekend of terrorism in France and a failed coup in Turkey failed to unsettle markets. Equities and currencies commenced the week quietly with the USD settling and share markets perched just below highs. QE has provided massive amounts of cheap money to supply equity markets and it would take a huge Geo-Political event to upset the rallies.

The EUR traded 1.1075, while the GBP jumped to 1.3300, later drifting back to 1.3260. A Bank of England member has questioned a need for a rate cut, which can be justified, as Brexit may be a boon for the country and the currency.

NZ CPI came in at 0.4%, for Q2, missing expectations. This pushed the currency below 0.7100 and with the looming RBNZ update, points to further downside. The AUD continued to trade around 0.7600, with the returned liberal Government nominating a no-surprise incoming cabinet, calming markets.

Markets remain quiet, awaiting the next Geo Political event or Central Bank disruption, to determine the direction currencies and equities.

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