Collinson FX Market Commentary- July 24, 2014 - Rate rise hits trade
by Collinson FX on 24 Jul 2014
Collinson FX market Commentary: July 24, 2014
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Denmark 49er FX - Day 4, Oceanbridge Sail Auckland 2013 © Richard Gladwell www.richardgladwell.com
The Middle East remains a war zone with no immediate peace plans in Gaza. Hamas has made peace demands, similar to those of the Black Knight, which suggests there may be some flexibility to come. Geo-political pressures are declining in the Ukrainian crises as Putin appears conciliatory, offering appeasement. Inflationary pressures in the US have allowed the Fed to commit to a 'considerable time' of low interest rates after the conclusion of QE infinity.
This has sustained the equity ‘Bull Run’ despite the insipid growth rates and economic advancements. The IMF reviewed the GDP growth rate back to 1.7% from 2.0%, but one suspects there may be further downward revisions. This has not assisted the EUR which continues to melt, trading 1.3540 while the GBP is slipping back towards the significant 1.7000. Inflation is also under control in Australia with the quarterly number of 0.5% pushing the annual rate to 3.0%, which is at the top of the RBA range.
This triggered an immediate rally in the currency with the AUD trading up towards 0.9440, a rise of almost a big figure. The KIWI is trading around 0.8670 once again and is likely to be further supported by a rise in interest rates by the RBNZ today. A rise in rates will further impact the economic recovery and this is likely to be reflected in the trade data also released today. Exports and Imports are likely to contract as the RBNZ monetary policy hits the trade economy hard.
Collinson FX market Commentary: July 23, 2014
Equity markets resumed the upward grind into record territory as markets digested the Geo-Political crises globally and concluded no immediate threat. The Middle East is consumed by warfare, while some commercial airlines have suspended flights, with precautionary lessons learned from the Ukraine. Russian forces and rebels appear to be more co-operative with investigative bodies as tensions subside.
Markets in the US focused on inflation, with the CPI coming in at 0.3% (2.1%p.a.), in line with expectations. The lack of inflationary pressures allows space for the Fed to control the retreat from QE Infinity. Despite this, the Dollar continued to rally against the defective EURO, moving to 1.3465 while the GBP traded 1.7060. The rise in the reserve currency was reflected in the KIWI, which drifted to 0.8655, ahead of a further anticipated rate hike from the delusional RBNZ.
Wheeler continues to see inflationary pressures where none exist and seizes the opportunity to raise rates to combat the paranoia over the housing market. The impact has been sudden on the 'rock star' economy, which has contracted, driving most economic indicators lower and decapitating the recovery.
The AUD has slowly climbed back towards 0.9385, while the country is pre-occupied with the Malaysian air crises, with little to divert on the economic front. Geo-Political issues remain central, with no major economic data to divert attention, although Central bank activity will impact.
Collinson FX market Commentary: July 22, 2014
There was little in the way of economic news so markets followed Geo-Political events. The Ukrainian situation is in danger of spiraling out of control as pressure grows for increasing economic sanctions. Any sanctions imposed on Oil/Gas or Banking in Russia will have far reaching repercussions on Europe.
This is the reason for equity markets slipping in Europe while the single currency trades 1.3520 and the GBP 1.7070. The Middle East is in turmoil with the Israelis invading the Gaza strip to prevent the continuation of concerted rocket attacks on their population.
The Syrian war marches on supported by the Iranians (as is Hamas in Gaza!) and now Libya has again erupted into outright war. The march of the ISIS across Syria and Iraq completes a disastrous breakdown of civilization. A to lack of engagement of the West, especially the USA is not helping.
The KIWI was trading just below 0.8690 while the AUD holds below 0.9370. Look for local data release and Global geo-political issues to drive direction.
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