Collinson FX Market Commentary - Aug 4 - USD up, EUR slips, GBP drifts

by Collinson FX on 4 Aug 2016 Collinson FX Market Commentary - Aug 4 - USD up, EUR slips, GBP drifts

Aug 4 - Markets were steady overnight, as EU Services and Composite PMI data came in slightly above expectations, in line with similar releases in the US and China. The US ADP Employment reported an improvement in private sector jobs. This lead to a rebound in the USD, with the EUR slipping to 1.1150, while the GBP drifted to 1.3320.

The stronger reserve triggered a slide in the bloated NZD, which fell to 0.7135, while the AUD stabilised around 0.7575. The KIWI's comparatively large recent gains, go some way to explaining the relatively large losses, compared to the size of the rally in the big Dollar. NZ commodity prices were softer and recent efforts by the RBNZ may have some influence, but by good fortune, rather than design.

Market focus will now shift to the Bank of England and their rate decision, tonight, while the Challenger Jobs report may give some hints to the coming Non-Farm Payrolls.

Collinson FX Market Commentary - Aug 3 - Australia cuts rate again
Aug 3 - The RBA summed up the state of the global economy well, observing retarded global growth, thus allowing feckless monetary policy. The RBA outlined the lack of global growth, which inflation reports across Europe, Asia and the U.S. have directly confirmed. This impacts commodity demand, headlined by Oil, which is now testing $40/barrel on the downside.

Despite the lack of demand, commodity currencies continue to over-perform. NZ Dairy prices have been reviewed as steady, but on extreme lows, allowing a pressure on the currency!? This has not occurred and the mismanagement has been highlighted by the RBNZ incompetence. The RBNZ inflation report allowed further speculation and undermined the goals of the Central Bank. The RBA cut rates by 25 basis, to an all time record low, 1.5%! This was under extreme international pressure and had the desired effect for a short time.

The AUD fell back to 0.7500, but under international consideration, bounced back to 0.7600! Central Bank activity has been considered under the global QE. The KIWI has also been buoyant, afflicted by global Monetary Policy, rising above 0.7200. The Reserve currency has reinforced the reality of a weaker global economy, drifting lower, undermined by the Fed. The EUR rose back to 1.1200, while the vaunted Fiscal Stimulus from Japan has backfired, allowing the JPY to approach 100.00. Central Banks continue to dominate with Monetary Policy dominating fiscal ineptitude.

Collinson FX Market Commentary - Aug 2 - Tasman dollars dip
Aug 2 - European markets were underwhelmed by the Manufacturing PMI data, which was neutral, showing little in the way of progress. Oil is now testing $40/barrel, a reflection of global demand, hitting energy companies and associated economies.

US ISM Manufacturing was lower, in line with the hugely disappointing GDP number, confirming a global story. Chinese Manufacturing slipped below the all-important 50, which is the distinction between expansion and contraction, hitting commodity prices.

The AUD was directly impacted, falling to 0.7550, ahead of the RBA decision. Global QE would indicate further rate cuts are likely and the over valued currency warrants action. Failure to do so would see a spike. The RBNZ is set to release an inflation report, which should confirm benign growth, thus increasing the pressure for further rate cuts.

QE is flooding markets with cheap money and creating bubbles, while achieving little on the economic recovery front, which is reflected in global economies. It does drive the equity and bond bubble. The NZD slipped back to 0.7170 with local trans Tasman Central Bank commentary and Dairy Auction prices set to drive currency direction.

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