Collinson FX Market Commentary - June 11 - A Canary in the Mineshaft

by Collinson FX on 11 Jun 2016 Collinson FX Market Commentary - June 11 - The Canary in the Mineshaft

June 11 - Markets closed the week negative, as global economic data underwhelms, while the 'Brexit' upsets the apple cart. The GBP has been controlled by EU referendum, falling on 'leave' prospects, while momentum builds up to the vote on the 23rd of June.

The latest poll has the leave camp gaining momentum and why not? Nearly all politicians are extreme advocates for the 'remain' so that should tell voters something. Are things going well under the status quo? The fear is spreading to the European markets, which would be devastated if Britain left the Union, as a major contributor and a symbol for other donor nations. The GBP plunged to 1.4250, contaminating the EUR which slipped to 1.1250, as the safety play remains the Dollar and Yen.

The Fed will ignore previous rhetorical commitment this coming week, which would normally undermine the Dollar, but Brexit fears may overwhelm this sentiment. Commodity currency gains were undermined on Fridays trade, with the AUD falling back to 0.7380, while the NZD fell to 0.7050!

The RBNZ had a bad case of inertia, fuelling rallies in the currency, but the macro picture remains the underlying power. Take note of global bond markets, which are the canary in the mineshaft, with 10 year Bond around zero and the 10 year Japanese bond negative!

Collinson FX Market Commentary - June 10 - Kiwi in hot pursuit of AUD
June 10 - The RBNZ left rates unchanged with an ease bias remaining. The Central Bank is cognisant of inflation, a fear few other Central Bankers have, thereby resisting the temptation to cut rates to combat the rampant NZD. The KIWI surged on the news, to record highs for the year, challenging exports and a trade lead recovery.

The NZD jumped a big figure on the news, to trade 0.7130, consolidating in global markets overnight. There were gains against most of the cross rates, while the AUD managed to trade 0.7440, only incremental higher.

German Bond yields are at record lows, while German trade data was static, with exports and imports flat. The ECB began the corporate bond program, to extend QE, further expanding a massively bloated balance sheet. Draghi warned of 'lasting economic consequences' from years of weak growth! Global economic conditions remain fragile despite unprecedented QE. There are many, many warning signs.

Collinson FX Market Commentary - June 9 - Kiwi chasing down AUD
June 9 - Markets continued to operate in the environment created by the Fed. The shocking Non Farm Payrolls number, to close last week, has put the USD in sharp reversal. This has boosted commodity prices and currencies, while ensuring QE extension, thus boosting equity markets. The shrinking reserve has pushed the mortal EUR to 1.1390, while the JPY held below 107.00, supported by steady GDP numbers.

Chinese Trade data, revealed further deterioration, as exports fail to keep pace with rising imports. The falling reserve advanced commodity prices and the associated currencies. The AUD pushed up to 0.7470, while the NZD broke above the big, big figure of 0.7000!

The KIWI moved north despite weaker local manufacturing data and ahead of the RBNZ rate decision. The Central Bank will be sorely tempted to combat the rising currency with rate cuts, but will probably rely on rhetoric and the forlorn hope of a US rate hike.

Collinson FX Market Commentary - June 8 - Antipodean storm surge

June 8 - EU GDP was marginally higher, coming in at 1.7% p.a., beating expectations. The growth rate in the economically challenged economy has been difficult, to say the least, while the disparity is obvious. The powerhouse of Germany has dragged the retarded Med states away from stagnation. Germany has gained from the EUR, stimulating exports, through a monetarily distorted currency.

The ECB has done everything possible to win the currency wars but investments is a necessary component of growth? The Fed is using economic stagnation as an excuse to avoid committed interest rate rises. Yellen has talked the talk but walked away. She is trapped in a grotesque monetary trap. Deficit and debt have increased with cover being given by low interest rates supporting fiscal ineptitude. The Fed, ECB and other Western Central Banks are trapped. Economic growth is the only dependable in terms of economic data.

This provides the excuse Central Banks needed, to continue expansionist monetary policy, hiding fiscal ineptness.

The RBA left rates unchanged, despite temptation, with a neutral bias. The surging currency, rising to 0.7450, is being put in the hands of a Fed rate rise. The NZD has also been dragged along by antipodean confidence, moving to 0.6950, encouraged by a falling reserve.

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