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Collinson FX Market Commentary- April 25, 2014 - RBNZ stands alone

by Collinson FX on 27 Apr 2014
NZ Etchells Nationals 2014, Day 2, Race 3 © Richard Gladwell http://www.richardgladwell.com

Collinson FX market Commentary: April 25, 2014

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Equity markets continued to tumble, lead by the tech heavy NASDAQ, considered the most overvalued in the equity bubble. Visa is being hit by Russian boycotts as the US and others start to pay the price of intended sanctions. It is not just Russia that is being impacted by the 'cause and effect' of the Geo-Political crises. Ukrainian and European gas dependency will become a major issue as tensions continue to rise.

The Dollar was weak with the EUR 1.3830 and the GBP 1.6800. A plethora of economic data is to be released, into the coming week, globally. Attention will be paid to global growth and manufacturing, along with employment, culminating in Non-Farm Payrolls Friday. Central Bank activity will also be influential with FOMC meeting and announcing at the end of the month.

The RBNZ made their intentions clear by once again rasing rates. They are the only devloped country to do so (not including the undersiege Russian Rouble!) and evidently believing the 'rock star' economy is in need of a brake!

Tightening monetary policy must be focused on the booming economy of 'Middle Earth'!?

The KIWI was supported by the rate rise but slipped back from 0.8600 with jaw boning. The AUD continued remained soft, trading 0.9265, as weaker inflation data supports extended low interest rates. Look at data and Geo-Politics for market direction this coming week.


Collinson FX market Commentary: April 24, 2014

Newsflash: RBNZ has raised the OCR to 3%. RBNZ says the speed and scale of the rate rises will depend on data and inflation pressures. Inflation is moderate but pressure increases. RBNZ will raise rates to keep future inflation near 2%. (From Collinson's Mobile app)

The turn around rally underway over the last week and a half, has stalled with some questionable economic data across the globe, testing confidence. Equities crashed in Europe after worries over demand from China and mixed PMI data.

PMI Manufacturing, Services and Composite rose but was distorted by strong growth from Germany and soft activity in France. The EUR held 1.3800 after a steady rise was dampened by equally poor data from the US. New Home Sales plunged 14.5% and Weekly Mortgage Applications dropped 3.3% despite the record low interest rates. Housing recovery appears to have 'hit the wall' this year after a steady recovery.

The interest rate cost is an incentive so demand must be driven by weaker consumer activity.The AUD tumbled yesterday after the release of CPI inflation data. Expectations were for around 0.8% for the quarter and a big miss came in at 0.6%. This allows the RBA to continue the low interest rate environment and takes the pressure off the currency.

The currency dropped back to 0.9280 and allowed upward pressure on the KIWI to stall. The NZD dipped to 0.8580 with the RBNZ to announce the latest rate decision this morning. The hawkish Governor has probably made his point, with the last rate hike, and will resist further temptations. Look to further economic data release, to drive currencies and equities, with the absence of any break-out Geo-Political events.


Collinson FX market Commentary: April 23, 2014

Equity markets built on last week's gains which has all but eliminated the almost forgotten correction. It appears Geo-Political threats have subsided and markets are looking towards promising corporate earnings reports and activity. Economic data has been positive recently without setting the world on fire. US leading Indicators rose 0.8% and Manufacturing improved according to the Richmond Fed's report.

House Prices rose 0.6% and Existing Home Sales rose, on last month, although remained negative. The Housing sector has undergone a renaissance over the last year but recent jitters have worried many. Housing has been underpinned by the Fed's exceptionally low interest rates over an extended, extended period! The threat lies with a break out in bond yields which would act as a panic button.

It is the sheer volume of US debt saturating markets that must eventually spook investors. The EUR rose to 1.3800 and the GBP to 1.6825 with the embattled Dollar suffering badly. Australian Leading Indicators rose which assisted the AUD back to 0.9365 supported by a weakening reserve. The KIWI moved back to test 0.8600 regaining recent losses. The situation in the Ukraine remains unstable with a potential to trigger market uncertainty.

Look to US Corporate earnings and M&A activity. Economic data releases across Asia, Europe and the USA will also drive market direction in an abbreviated week.

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