Collinson FX Market Commentary - Oct 30 - AUD slides in turmoil

by Collinson FX on 30 Oct 2017 Collinson FX Market Commentary - Oct 30 - AUD slides in turmoil

Equity markets in the US surged to record levels, triggered by better than expected earnings from Amazon, Microsoft and Google. US markets are on fire. The Dollar also managed to eke out gains, ahead of next weeks FOMC meeting, expected to be bullish. Trump has narrowed down his selection for Fed President and it will be a hawk! Catalonia declared independence from Spain, unsettling the Political Union, adding to an already unhappy union.

Eastern bloc members are electing right wing, anti-EU Governments, forming an alliance to fight against Centralisation. The EUR now tests 1.1600, on the downside, while the GBP slipped to 1.3120. There is an avalanche of global economic data, this coming week, headlined by growth and Central Bank action.

The Australian political situation is in turmoil, with the incumbent Turnbull Liberal Government losing it majority in parliament. The situation is fluid but uncertainty breeds discontent.

The AUD has slipped back to 0.7650, while the NZD trades around 0.6850, suffering the injustice of a socialist 'Grand Rainbow' coalition. Contrast the growing strength of the Trump led USA against the Globalist lead Europe and Australasia!?

Collinson FX Market Commentary - Oct 27 - KIWI drops further

US Equities continued the record bull market, bolstered by strong earnings from Ford, Twitter and Time/Warner. The ECB kept rates unchanged in what was perceived as a 'dovish tapering' policy statement. ECB President Draghi outlined the continuation of the bond purchasing program and left rates unchanged, until at least September 2018, 'or beyond if necessary'.

This monetary policy confirms that the EU remains in a completely different stage of the economic cycle than the US and Canada, who have already started raising rates and tapering. This hit the EUR, which fell back to 1.1650, reflecting the relatively stronger US economic position. The Dollar booked gains as economic conditions and sentiment remained strong. This hit commodity currencies, which remain vulnerable, due to weak growth prospects.

The AUD slipped back to 0.7650, while the NZD fell to 0.6840, with little on the economic front to excite. Australian inflation remains challenged, reflecting weak economic growth, while NZ economic conditions are challenged by the prospects of the new socialist coalition Government.

Collinson FX Market Commentary - Oct 26 - AUD holds up KIWI

US economic data continued to best expectations, with Durable Goods Orders jumping 2.2%, while New Home Sales surged 18.9%. The US economy is thriving on confidence and sentiment and this is directly impacting the data and markets. Equities took a breather, after hitting record highs, almost daily. European markets await the outcome of the ECB tonight, with no rate rise expected, so it will be all about the language.

The Bank of Canada left rates unchanged, but recent rises have put the Bank of a tightening road.

Australian CPI was surprisingly weak, falling to 1.8%, from an expected 2% rise! This undercuts any talk of an RBA rate rise and undermines the AUD. The currency tanked, dropping below 0.7700, allowing the NZD to stabilise.

The NZD remains vulnerable, trading 0.6860 and only the weakness of the AUD has steadied the cross rate.

Collinson FX Market Commentary - Oct 25 - KIWI continues to tank

US equities continued to surge into unknown, record territory. Earnings have been supporting the massive gains in valuations, but all the gains are completely reliant on the pre-requisite of tax reform. In contrast, the European Union is being buffeted by political upheaval.

The string of recent elections in favour of right wing, anti-EU Governments, has threatened the unity of the remaining nations post-Brexit. The British strive for an exit strategy, that will include a trade agreement, but have been opposed by bureaucrats. The Catalan Independence is boiling over, adding to the complex mess, unsettling stability. US PMI data was stronger, while the EU data softened, reflecting current economic realities. The market has been digesting the NZ political situation and the assessment is not good!

The Grand Rainbow Coalition has a decidedly Socialist tendencies, which will lead to bad outcomes. The KIWI reflects this, collapsing to 0.6870, with very poor prospects. The negatives have not gone unnoticed across the Tasman, with the cross rate falling towards 0.8800 (1.1350), despite the AUD drifting to 0.7770.

Collinson FX Market Commentary - Oct 24 - Tasman gap widens

US equities opened the week at record highs, supported by the prospect of tax reform after the budget passed through Congress. Earnings have been strong and the pre-requisite for tax reform under reconciliation is now live and real.

The Dollar is strongly supported, with the EUR trading 1.1730, while the Yen moves to around 114.00, after the landslide re-election victory of incumbent PM Abe. The Czech republic also had a victory of the right, with Billionaire Andrej Babis elected, who is likely to form a Government from the right.

This is not great news for the EU, as they form the growing anti-EU Eastern Block, from within the 27 members. This comes at a time where torrid negotiations continue, to determine Brexit and any future trade agreement.

The NZD trades at lows, holding around 0.6950, looking extremely vulnerable after the surprise formation of the left-wing Government. The AUD has drifted back to 0.7800, awaiting Consumer Confidence data today, but weakness comes from a stronger reserve.

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