Collinson FX Market Commentary - June 26 - NZD flies under the radar

by Collinson FX on 26 Jun 2015 Collinson FX Market Commentary - June 26 - NZD flies under the Click here to find out how to get CollinsonFX's free iPhone app

June 26 - Equity markets drifted lower with little news on the domestic economic front and focus remaining on the Greek debt negotiations. Brinksmanship continues, with Greeks refusing a compromise on the improved proposal, given to EU leaders. The EU leaders have recognised the improved bargaining position but require further sacrifice.

The Germans will compromise to save the EUR, which has enabled such a wave of export driven growth, subsidised by a undervalued currency. The EUR continued to trade around 1.1200, while the GBP pushed up to 1.5735, amidst a nervous period of flux. US Consumer Spending jumped to 0.9%, while income was steady, reflecting consumer confidence. Commodity demand remained weak, which continues to undermine the underlying strength in the associated currencies.

The AUD builds above 0.7700, while the KIWI is staging an 'under the radar' recovery, moving back above 0.6900. The NZD Dollar has been hit hard by recent RBNZ cuts and external pressures from the reserve. Commodity prices have also impacted although this should filter through to trade data, perhaps not today, but in the near future. The interest rate differential remains substantial, in the new economic environment, providing an attractive investment prospect at these levels.

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Collinson FX Market Commentary - June 23 - Greeks dominate
June 23 - Greek negotiations continued to dominate markets, with the Greek PM rejecting creditors terms and EU leaders suspending talks, reconvening tomorrow. The recent optimism is being questioned, as both sides appear far from agreement, pushing global equities lower. US markets retreated from record highs, hit by the news from Europe, despite a review upwards of the devastating recent GDP number. The growth (contraction) number was reviewed up, from (0.7%), to (0.2%). The EUR managed to push back to 1.1200, while the GBP drifted to 1.5700, awaiting further developments from EU leaders. Commodity demand remains weak, hit by Chinese equities and property concerns, manifesting in the currency. The AUD is now testing 0.7700 on the downside, while the NZD has bounced off technical lows to 0.6880, both looking to consolidate. All eyes remain on Brussels, which will decide market direction for the week, while antipodean markets are watching Chinese developments closely.

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Collinson FX Market Commentary - June 22 - Greek agreement by end of month
June 22 - The Feds Jerome Powell sees rate rises in September and December and calls economic growth stronger than expected in the US. This gave the Dollar a major boost, with the a EUR plunging to 1.1160, while the GBP dropped to 1.5710. The positive Greek proposal was given to EU Finance Ministers and expectations are for an agreement by the end of the week.

Details are sketchy, but with some Greek back downs, a deal will be forthcoming. The Germans will cave in order to protect the own bank exposure and the EURO. Equities remained positive, while US Manufacturing and New house prices remained positive. EU Manufacturing and Services also managed some gains which bodes well for an economic recovery.

The Chinese situation is deteriorating fast, after a 13% fall in their equities last week and a property downturn! which must translate in a fall for Capital goods from Europe and the US. This would also necessarily result in a fall in commodity demand from associate countries. This has undermined the strength in the AUD which is trading 0.7720, while the NZD is testing technical lows around 0.6850. Greece remains a lightning rod and Chinese economic pressures will impact currencies over the remainder of the week.

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Collinson FX Market Commentary - June 21 - Greeks get out of jail?
June 21 - All smiles in Europe as Greek proposals are agreed!? The submission was accepted by European leaders and was reasonable and comprehensive thereby allowing a huge boost to market confidence. European equities surged with the CAC and DAX jumping nearly 4%! Greek bond yields fell 1.5%, while German and US Yields settled.

The crises has been averted, it seems, with all eyes now on debt repayment. An agreement was the most probable outcome as Europe prefer to accept Greek recalcitrance rather than risk the fall of the whole deck of cards. The EUR was steady at 1.1350, while the GBP traded 1.5820, more immune to the European crises. The USD managed to book some gains on the back of strong Existing Home Sales (+5.1%).

Commodity currencies slipped further in the face of the rising reserve, with the AUD falling to 0.7720, while the. NZD tested 5 year lows. The KIWI is now in dangerous technical territory, as the RBNZ gets its way, with Monetary Policy having the desired impact.

Policy has been complimented with timing, as the Fed threatening interest rate rises, adding to downward momentum. Interest rate differentials remain substantial, but sentiment is moving the way the Central Bank anticipated, allowing downside until the low currency filters through to a broad improvement in the economy. Central Banks dominate market moves while economic data influence will probably dominate markets for the remainder of the week.

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Collinson FX Market Commentary - June 20 - Quadruple witching day
June 20 - The surprising rally in US equities from Thursday was reversed today, on Quadruple witching day, exposing some short positions. Market assurance remains in place, as confidence builds, that the Fed will continue to keep the liquidity taps on. Greece was again sidestepped with a new emergency meeting set for Monday.

The massive run on local Greek Banks does indicate that, they at least, are preparing for an exit from the EU. Relief would be the overwhelming emotion felt in Europe and globally. Is it the first domino? The GBP remained strong around 1.5870, while the EUR consolidated around 1.1350, tensing for a possible major test Monday. Commodity currencies felt the drift in confidence, with demand pushing the AUD back to 0.7770, while the KIWI tested 0.6900 on the downside.

The NZD is the victim of the RBNZ belated monetary policy epiphany and may find some balance when the economy reacts to the stimulus. This week will focus on the Greek emergency meeting and then concentrate on Manufacturing and growth as the week progresses.

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Collinson FX Market Commentary - June 19 - Greek crisis deferred to Monday
June 19 - The Greek crises reached critical with no agreement and default looming. European leaders called an emergency summit for Monday to avoid imminent default. This was enough to defer any major market collapse, while US markets in fact surged, with the NASDAQ hitting new records.

The EUR traded 1.1375, while the GBP jumped to 1.5880, boosted by strong Retail Sales. US equity markets rose sharply after the averted crises in Europe and some stronger than expected inflation data. US CPI rose 0.4%, moving out of the contractual phase of recent times, hinting GDP growth may rebound. The AUD/USD edged closer to the 0.7800 level, with the KIWI plugging to 0.6950, pushing the cross back below 0.8900!

NZ GDP growth tumbled 0.2% pushing annual growth back to 2.6%. This explains the Central Banks recent cuts and probably translates into further. Wheeler has been miles behind the curve, considering all major trading partners, deserving much of the blame for the economic slowdown.

This will put downward pressure on the NZD boosting terms of trade and lowering cost of capital. This should boost investment, lowering borrowing costs, increasing consumer confidence. The question is why not years ago when all other developed countries were acting? Q
uadruple witching day tomorrow may bring volatility to US equity markets but all eyes remain on Europe.

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Collinson FX Market Commentary - June 18 - KIWI below 70c
June 18 - The Fed left rates unchanged with Yellen referring to a 'gradual rate rise'! This is exactly what will happen, but the question is, when? GDP data and inflation will confirm any reticence the Fed may have had, meanwhile global growth ensures no immediate action, despite telegraphs! The Greek situation will be deferred, thus remaining an issue, debasing Europe and global markets.

The Feds lack of action allowed the EUR to jump to 1.1350, while the GBP spiked to 1.5835, in spite of anaemic economic data.

Commodities were mixed, but the flagging reserve caused the AUD to hold 0.7750, while the NZD remained below 0.7000. Inaction by the Fed will pressure movement in the reverse direction from the RBA and RBNZ. The NZ Reserve Bank has more room to move due to dilatory actions over the last few years!

Collinson FX Market Commentary - June 17 - Greek inaction continues

June 17 - European equities wallowed, struck by inertia, from Greek inaction. The Greeks are refusing to budge while European authorities threaten financial repercussions. There has been a further run on local banks, which are now being supported by ECB cash, with the locals preparing for a possible exit. European Finance Ministers will reach a compromise Thursday, but there is an outside chance of default, so markets must be ready.

US Markets regained yesterdays losses, ignoring continued Greek volatility, focusing on local economic data. The Fed meeting began, with little expectation of action, with last quarter contraction in GDP growth and mixed Manufacturing and Housing data. The GBP traded 1.5650, while the EUR slipped to 1.1240, after ZEW Sentiment data weakened further.

The AUD drifted lower despite improving Consumer Confidence. RBA Minutes reflected concerns over the burgeoning housing market, due to low interest rates, but recognised the low rates were required to boost investment and lower pressure on the AUD.

The AUD dropped to 0.7730, while the NZD fell below 0.7000, with trade data out this morning having a minor impact. Currencies remain under the jurisdiction of Central Banks with local economic data having short term impact.

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Collinson FX Market Commentary - June 16 - Greek debt talks abandoned

June 16 - Greek debt negotiations lasted just 45 minutes, in Brussels, when parties broke and abandoned talks. The Finance Ministers meeting at the end of the week is now the conduit to agreement. This could be the last chance before Greek default, as opposed to voluntary default, already played as a card in the game.

The Fed meet tonight for their two day meeting and are not expected to touch interest rates but may indicate a move for September.

The Greek situation remains highly unstable, which does not allow confidence to blossom, in a challenging environment. US Manufacturing and Industrial production, both missed expectations, adding to the lack of pressure on Fed rate rises.

The EUR hit 1.1280, while the GBP broke back above 1.5600, with advantages over Europe. Commodity currencies were solid, with a weaker reserve, but will be equally unstable in the face of Greece and the FOMC meeting.

The NZD is trying hard to regain 0.7000, while the AUD moved up towards 0.7770. Economic data will influence currencies in the lead up to the FOMC and Greek debt negotiations.

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