Collinson FX Market Commentary - May 20 - US rate rise next month?

by Collinson FX on 20 May 2016 Collinson FX Market Commentary - FX Market Commentary - May 20 - US rate rise next month? Click here to find out how to get Collinson FX's free iPhone app

Oil demand is on the rise and so is the price. This has supported energy companies and boosted equities, although the Fed has thrown cold water on that, with the prospect of a rate hike in June.

The Fed minutes suggested a rate hike may come as early as next month and boosted the Dollar. The EUR traded around 1.1200, while the GBP held above 1.4600, with polls indicting a 'no' to 'Brexit'. The Dollar has had a dramatic impact on commodity currencies

The AUD fell below 0.7200 overnight, recovering before the Australian market opens, to regain the big figure. Australian unemployment held steady, at 5.7%, defying expectations.

The NZD traded 0.6730, with a steady reserve, although data is likely to be used to reverse Fed intentions driving the currency Click her for the latest financial news, exchange rates and Stock indices

Collinson FX Market Commentary - May 19 - US talks rate hikes

May 19 - Fed minutes were released with further talk of rate hikes. The Federal reserve has held interest rates at record low levels for years to compensate fiscal ineptitude and to stimulate growth. The results are questionable, at best, resulting in asset bubbles and anaemic growth.

The latest Fed minutes has intimated a rate hike as early as next month! Actions speak louder than words. Yellen has telegraphed action since last year but economic data has excused moves. It is hard to see a change in the global economy.

The Dollar took heart, pushing the EUR back to 1.1200, while the JPY moved to 110.00 precluding BOJ intervention. Commodities remain bid but the surge in the reserve pushed the associated currencies lower. The NZD fell to 0.6725, while the AUD dropped to 0.6720, with employment the focus today.

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Collinson FX Market Commentary - May 18 - Okkers get unpleasant news
May 18 - Oil continued its upward mobility, moving inexorably towards $50, pulling commodities upwards. This cemented the associated currencies, with the NZD testing 0.6800, while the AUD consolidated above 0.7300.

The RBA minutes were released, confirming the unpleasant surprise inflation gave them, although no immediate plans for further interest rate cuts gave momentum. The DOW did everything it could to give up the previous days gains, despite promising housing data, fuelled by talk of a Fed rate rise.

The EUR held 1.1300, while the GBP jumped to 1.4450, after a poll confirmed no 'Brexit'! US Housing Starts and Building Permits both rose, but evidence points to volatile moves, thus allowing negative sentiment to prevail. QE has failed in Europe and Japan so perhaps the Fed are looking to alternatives!? Doubt IT!

Collinson FX Market Commentary - May 17 - Oil prices surge
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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