Collinson FX Market Commentary - Nov 20 - More trust Trump than Feds

by Collinson FX on 20 Nov 2016 Collinson FX Market Commentary - Nov 20 - More trust in Trump than Fed

Nov 20 - Equity and Bond Markets consolidated after the huge Post-Trump election. Bond yields have continued to rally strongly, now supported by rhetoric from the Fed, although talk that may be considered this time. The Fed has promised numerous rate rises in the calendar year, but has failed to deliver, 'printing' money with gay abandon! Trump has promised fiscal expansion, tax cuts and growth.

The market seems to have more faith in him than the failed Fed! A growth led recovery has been signalled, which will improve confidence and economic conditions, globally. The rise in yields may become attractive for many and equities may lose their mojo, giving the bubble a reality check, so investors beware. The Dollar has surged to record highs on the index, while the EUR is now testing 1.0600, on the downside.

The Yen has surged through 110.50, while the Pounds initial resistance, has stuttered. This coming week will see economic data related to global growth, Manufacturing and trade. The Dollar is now in a bull market with lessor currencies battling for relevance.

Collinson FX Market Commentary - Nov 18 - US Confidence up post-Trump

Nov 18 - Confidence is on the rise in the US economy, post the Trump election, with economic data gaining upward momentum. Housing starts spiked, up over 25%, while weekly jobless claims fell. The CPI number was steady, but bond yields have surged, reflecting the markets confidence and pushing the Fed to raise rates.

Trump has been super critical of the Feds monetary policy, leading to speculation he would force changes, which surfaced when Chair Yellen was questioned by congress. She was asked about her continued position and raising rates. She confirmed the rate rise is a firming prospect, while denying any resignation. The Fed has been much of the cause of the economic stagnation, partially pressured by extremely lax fiscal policy, but the Fed members will be held accountable by the Trump regime.

The whole discussion plays to the bull run the Dollar has embarked upon, with the EUR falling to 1.0630, while the Yen tests 110.00! Australian employment data was weaker than expected, with slower jobs growth and a lower revision of last months disappointment. This confirmed the fears revealed in the RBA minutes, which highlighted the slowing wage growth, threatening the ability to service soaring household debt and consumption.

The data directly impacted the currency, which has fallen back to 0.7400, accentuating the effect of the rising reserve. The NZD was not immune to the rising Dollar, slipping back towards 0.7000, adding to the economic woes arising from the hugely disruptive earthquakes.

Collinson FX Market Commentary - Nov 17 - Profit taking post-Trump

Nov 17 - Equity markets finally retraced, post the 'Trump effect', with some profit taking!

The pro-growth, lower taxes and infrastructure spending, has been a boon to equity markets and the Dollar. US Industrial and Manufacturing production were flat, while the NAHB House market Index was also steady, supplying little impetus from economic data. Bond yields remain bid, supporting the spiking Dollar, with the Index breaking new highs. The Yen has now consolidated above 109.00, while the EUR has slipped further, to trade 1.0675.

The GBP has been stubbornly strong, with a post-Brexit recovery, trading just below 1.2500. Commodity currencies have also suffered the rising reserve, with the earthquakes unsettling the KIWI, while the RBA delivered some uncertainty. The RBA minutes indicated positive future circumstances, but enunciated some concerns over rising household debt, while noting the importance of wage growth to service debt and consumption.

This undermined the currency, which slipped back to 0.7470, while the NZD drifted back to 0.7060. Australian Employment data will likely impact the currency in local trade.

Collinson FX Market Commentary - Nov 16 - KIWI in soft spot

Nov 16 - Markets are consolidating after a massive week of gains and tumult. The post-Trump surge in equities have been booked, at record levels, while interest rates are on the march supporting a bull run for the mighty Dollar. The change in direction for interest rates and the Dollar look to be a juxtaposition, from last week, confirming a change in the trend line.

Equities are a in an over inflated bubble and may well suffer a correction, despite the surge in confidence and rising risk-appetite. German Trade data improved, while GDP growth was flat, but the worry was the contraction in sentiment in the important ZEW survey. This did not assist the EUR, which slipped back to 1.0720, while the Yen broke above 109.00!

The GBP suffered a correction, dropping to 1.2430, with CPI data hinting at slowing growth momentum. The rising reserve has hit the commodity currencies, with the AUD trading 0.7540, while the NZD dipped below 0.7100. The KIWI has not been in a good space with the Dollar on the rise, while further earthquake disruption, has overwhelmed improved dairy prices.

Collinson FX Market Commentary - Nov 15 - KIWI hit by earthquakes

US Markets focused on the demand driven Bond markets, with interest rates surging, breaking the coma of recent years. Stagnant growth has resulted in an unprecedented flood of liquidity in the global markets, lead by the Fed's massive expansion of the balance sheet, in a vain attempt to stimulate growth in a dead economy. The paradigm has shifted, post-Trump, with interest rates climbing.

Speculation of a surge in fiscal stimulus and demand, has lead the death of the zombie bond market, returning from the dead. This has driven the rise of the Dollar, with the EUR falling to 1.0750, while the Yen hit 108.00! The only miscreant has been the GBP, which has traded around 1.2500, in post-Brexit recovery mode. Rising global demand will benefit commodity prices although this has not been reflected in prices due to the rising reserve.

The Dollar has pushed the AUD back to 0.7540, while the NZD flirts with the 0.7000's, shaken by the massive earthquakes. The long term impact is yet to be determined although global demand should enhance prospects. Local markets will be keenly awaiting the RBA minutes, for an insight in to monetary policy, while NZ markets remain preoccupied.

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