Collinson FX Market Commentary - Nov 24 - US surges as EUR stagnates
by Collinson FX on 24 Nov 2016
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Collinson FX Market Commentary - Nov 24 - US surges as EUR stagnates
US Markets continued to benefit the Trump surge, with equities hitting record levels, while the Dollar continued the bull run. The massive spike in confidence has fed risk appetite and prompted markets to flourish going in to the long Thanksgiving weekend.
The contrast with Europe is startling, with stunted equities and a mortally wounded currency. Europe remains stagnant, with flat growth and flooded with expansionary monetary policy, while the post-Brexit instability flourishes. The EUR has collapsed to 1.0550, while the GBP has fared better, trading 1.2450. The Yen has also been a major victim, now flailing, hitting 112.50. University of Michigan confidence blossomed, while Durable Goods Orders jumped, following the economic narrative.
Commodity prices have reacted well to the promise of a growth-led economic boom in the US, although the surging Dollar has taken its toll on the associated currencies. The NZD is now testing the big, big figure of 0.7000, on the downside, while the AUD slipped below 0.7400. Markets are now behaving in a more economically logical manner, rising with growth prospects, rather than reacting to external monetary interventionism.
Collinson FX Market Commentary - Nov 23 - Surfing the Trump Hump
Nov 23 - Equity markets continued to pile on the runs, exploring record new territory, riding the 'Trump bump'! Economic data release was slow in the US, in a shortened holiday week, allowing post-election trends to continue. The Dollar consolidated after some profit taking, with the Yen trading around 111.00, while the GBP remains above 1.2400.
The EUR remains challenged, trading 1.0600, after ECB President Draghi confirmed expansive current monetary policy. Commodities are bid, supporting the associated currencies, although tempered by the rising Dollar. The AUD attempts to regain 0.7400, while the NZD consolidates above 0.7000, relying on continued demand led support.
Collinson FX Market Commentary - Nov 22 - KIWI and AUD bounce back
Nov 22 - Risk appetite surged when markets opened in the US for a shortened holiday week. Thanksgiving in the States means the short week will encourage many to square positions. The Dollar reversed the massive recent gains, allowing some profit taking, while commodities rebounded strongly.
Commodities will be a major beneficiary of a demand lead recovery, sparked by enormous fiscal stimulus, while taxes are cut in the US. The pressure has been negated by the surge in the Dollar, while interest rates have surged, supporting the rising Dollar. Growth and demand have been scarce resources post-GFC, having been the missing link, contradicting traditional expansionist monetary theory.
This has allowed the commodity currencies to recover the recent onslaught, with the NZD bouncing back to 0.7050, while the AUD hit 0.7350. Building commodity demand, would normally support these trans-Tasman currencies, although the extent of gains may be severely tested by a bull market Dollar.
The GBP also received a welcome boost, jumping back to 1.1250, while the Yen hit 111.15. Equities charged north, to record levels, with the surge in renewed confidence. Markets are eating up the prospect of the new Trump regime!
(S-W: US President-elect Trump has just announced that he will pull USA out of the TPP agreement on his first day of office along with other measures.)
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