Collinson FX Market Commentary- Feb 19 - Markets wait

by Collinson FX on 19 Feb 2015 Collinson FX market Commentary: February 14, 2015

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Feb 19 - Markets keenly awaited the outcome from the Fed minutes and they did not disappoint. Global Central bank activity has been geared towards QE, thus preventing the Fed from acting, in terms of raising interest rates. This does have a positive effect on equities but is hardly a reason to believe in the economic recovery story.

Greece remains the biggest burden on European markets and until the resolution arrives things will remain subdued. The Fed used terms like 'premature rate increase;and 'patience', which has encouraged pundits to believe in QE and the most powerful global Central bank, will not buck the trend! The EUR dipped to 1.1340, while the GBP surged to 1.5420, supported by local data that contrasted the EU.US Housing data debunked the economic recovery theory with prime leading index retracing.

Commodity currencies booked earlier gains, with the AUD testing 0.7800, while the NZD consolidated above 0.7500. All eyes remain on the Greek debt re-negotiation and Central Bank largesse. The NZD currently trades 0.6615 and 0.4870 against the EUR and GBP, with the NZDJPY cross consolidating above 89.00.

Feb 18 - Greek debt re-negotiations dominated markets, again overnight, with a request for an extension of 6 months. Greek 3 year bond yields moved up to 18.62%, while emergency cash was needed from Banks, as outflows continued. Greece needs an extension, with cash running out and the only alternative an exit, from the EURO.

This boosted equities, that have rallied nearly 10% since ECB QE commenced, while the important ZEW Sentiment reports from Germany and the EU were strong. The EUR held 1.1400, while the GBP traded 1.5350, supported by strong House Prices and benign inflation. The commodity currencies rallied against a softening Dollar, with the AUD testing 0.7800, while the KIWI pushed through 0.7500 on the back of increased milk prices for the second time this year. Markets were steady despite a faltering Ukrainian ceasefire and instability from Greek turmoil.

Geopolitical issues remain a danger while the EU is threatened by Greek defiance. The NZD currently trades 0.6595 and 0.4895 against the EUR and GBP and has pushed back towards 90.00 against the JPY.

Feb 17 - European equity markets reflected the Greek debt re-negotiations, uncertainty, with markets in the 'irons'.

US consumer Sentiment drifted lower after a period of relative confidence. The EUR was inherently weak, trading 1.1325, while the GBP held 1.5350. Japanese GDP maintained growth levels above 2%, but these include the rebuild disappointing most, giving Asian markets no impetus.

This did not support any confidence in the commodity based currencies, with the AUD drifting to 0.7750, while the NZD held strongly on to 0.7470.

The KIWI continues to benefit from incredible interest rate beneficials, with the delusional RBNZ, maintaining a huge margin over trading partners. Markets will focus on Greece, in Europe, while economic data will drive US markets.

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