Collinson FX Market Commentary - May 17

Collinson FX Market Commentary - May 17 - Oil prices surge

by Collinson FX on 17 May 2016

Harken (USA) - Day 4 - ANZAC 18fters - April 2016 Richard Gladwell www.photosport.co.nz

Collinson FX Market Commentary - May 17 - Oil prices Click here to find out how to get Collinson FX's free iPhone app

May 17 - Oil prices surged towards $50/barrel, dragging the commodity price index up, while boosting energy companies. European equities were flat, with a German holiday, but US equities surged in afternoon trading. Oil was a positive, but continued flat economic data reinforces the lack of conviction from the Fed.

The Fed has continued to telegraph interest rate rises, while always using economic data as an excuse to resist, allowing equities to benefit QE. Monetary tightening is fanciful without fiscal restructuring in leading economies. Deficit and debt are climbing unabated, under cover of extremely low interest rates, thus debt servicing costs. EC member nations have broken all fiscal requirements and deficit/debt levels and are now at levels that a return to normal interest rate levels would mean default on debt!

The US is going down this road with debt spiraling amidst fiscal ineptitude. Interest rate rises would push debt servicing to levels that would consume revenue, causing a monetary crises. The Dollar was steady, with the EUR trading 1.1300, while the JPY nosed towards 109.00. Commodity rises boosted the associated currencies, although the rising Dollar countered that, with the AUD trading 0.7280 and the NZD 0.6780.

The RBA minutes may drive some fluctuations on the local front, with further rate cuts possible, as economic conditions and inflationary pressures dissipate.

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