Please select your home edition
Edition
Collinson and Co

Collinson FX Market Commentary- June 14, 2014 - RBNZ pumps KIWI up

by Collinson FX on 14 Jun 2014
- Day 5, 2014 Toyota Optimist Championships, Manly SC © Richard Gladwell www.photosport.co.nz
Collinson FX market Commentary: June 14, 2014

http://itunes.apple.com/app/collinsonfx/id533360650?mt=8!Click_here to find out how to get CollinsonFX's free iPhone app

US Equity markets recovered some lost ground to close a week of losses. The turnaround was a reactive bounce, rather than any fundamental recovery. The University of Michigan Confidence survey, contracted from 81.9 to 81.2, which is further indication the economic recovery is stunted.

The situation in Iraq is starting to spread discomfort in Geo-Political circles and this is being reflected in oil prices. The radical Islamists are overwhelming the incumbent Sh'ite Government and the country is turning into a war zone. This is unsettling for the US and allies who fought so hard to rebuild post-Saddam Iraq. The EUR continued this inexorable decline and traded 1.3540, due to ECB expansionary monetary policies, gifting huge risk free profits to member banks in an effort to clandestinely bail them out of their parlous financial positions.

The GBP is heading in the opposite direction, moving to 1.6975, thanking God they declined the single currency. NZ PMI contracted from 54.40 to 52.7 as the economy suffers the collateral damage inflicted by the Reserve Bank. Interest rate differential pushed the KIWI ever higher and now approaches the 0.8700 mark. NZ Trade will be impacted as the currency hits the all important trade sector hard.

Current Account data and GDP growth will start to reflect the Wheeler Syndrome. The AUD traded around 0.9400, while market turmoil, may impact in the coming week. Geo-Political issues in the Middle East and Europe have potential to upset markets with some local economic data giving daily direction.

Collinson FX market Commentary: June 13, 2014

Sentiment has changed this week with equities hit hard again. Once again, there was little in the way of economic data release, but the bubble is testing all-time record highs. Retail Sales improved but not to the degree expected and Jobless Claims rose.

This did not impact greatly as bad news is often good news, perversely, as the bad news will be greeted with more Central Bank stimulus. The bubble is primed, but the fear now is inflation, which would require the Central Bankers to tighten their massively expansive monetary policies. The RBNZ did just that, as paranoid Governor Wheeler, raised rates once again! He lives in the land of Oz, because this is an attempt to combat the Auckland property bubble, rather than a sustained threat from inflation.

This would be acceptable policy but for the fact that all other Central Banks are easing, thus promoting attractive interest rate differentials, thus the carry trade. The currency is reacting as expected and heading towards 0.8700.

This will hit the trade exposed sectors, which drive the NZ economy and impact borrowing costs locally, hitting business.

The AUD has taken the positive from this and hit 0.9400 supported by strong commodity demand. The EUR continues to wain, trading 1.3550, while the GBP pushes ahead to 1.6840. Markets are nervous with record levels not justified by economic fundamentals.

:


Collinson FX market Commentary: June 12, 2014

Equity markets tumbled with a sudden realisation that all is not well according to the World Bank! The review of global growth from 3.2% to 2.8% is another in a long line of downward moves. The World Bank and IMF continually espouse blue sky forecasts and then backtrack as reality hits home.

The ECB and the USA move post GFC corrupted Keynsian economic policies and run endless deficits to promote socialist polices rather than promote capitalism and self reliance. The result is endless mountains of debt which will destroy the economy.

At some stage the massive monetary expansionism will result in higher interest rates which will result in interest rates that will bankrupt economies. Interest rates will not rise for the right reasons, demand, but supply. At some stage the lure of low interest Fed and ECB debt will disappear and then bond rates will spiral and the GFC will seem a walk in the park. The EURO has been hit hard by the ECB and is self immolating. The single currency is trading 1.3525 and looks set to go lower. The Bank of England has changed course from the Fed and ECB and endeavours to battle back. The GBP recovers towards 1.6800 with a Governor who sees the light.

The RBNZ has no such luck with a leader who lives in Alice in Wonderland. He has raised rates in an attempt to reel in regional real estate bubbles ignoring the cost to the economy. He has raised the cost of capital and hit economic growth. The trade sector will be smashed as the NZD rises due to interest rate differentials and the resultant carry trade. RBNZ has raised rates again with .25% to 3.25%.

Update: RBNZ raised OCR by .25% to 3.25% as expected. RBNZ says high dollar is unsustainable. Kiwi up after announcement.


Collinson FX market Commentary: June 11, 2014

Markets were mixed overnight with slight swings between positives and negatives. The EUR continued to suffer the impact of the ECB's extra-ordinary negative deposit rates and crashed to 1.3540. The initial upward movement has been more than erased as the Central Bank continues massive monetary expansionism and wealth destruction.

The desired impact on trade will be almost immediate but the negative impacts will be more far reaching. UK Manufacturing and Industrial Production continued to recover, giving some support to the GBP, trading 1.6750. Italian GDP continued to contract, reflecting the struggles in the single market, and more especially the Med economies. US markets were steady, with the NFIB Small Business optimism reporting a tepid improvement, reflecting the marginal state of the domestic economy.

The AUD traded around 0.9350, despite a contraction in Job Advertisements and a deterioration in Business Conditions, reflecting some positive economic conditions emerging. The pressure from the RBNZ, to force the NZD lower, has begun to subside with the interest rate differentials encouraging the KIWI back towards 0.8500. Substantial economic data release or Central Bank activity will drive equities, currencies and Bonds for the remainder of this week.

For more on Collinson FX and market information see:
www.collinsonfx.com and www.collinsonwealthmanagement.com

Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |


Disclaimer: The details expressed in this website and accompanying documents or transmissions are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Collinson Forex Ltd accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.

Collinson and Co

Related Articles

Collinson FX Market Commentary - Feb 21 - Pence steadies Europe
The AUD remained below 0.7700, while the NZD drifted below 0.7200, looking for support from the Dairy Auction. US equities settled in a quiet open to a holiday weekend. The Dollar was also steady, with the EUR trading 1.0600, while the Yen held above 113.00. The AUD remained below 0.7700, while the NZD drifted below 0.7200, looking for support from the Dairy Auction.
Posted on 20 Feb
Collinson FX Market Commentary - Feb 17 - Bullish markets in US
The AUD was softened by the news, slipping below 0.7700, while the NZD jumped to 0.7225 Australian Employment data was mixed, with Unemployment falling to 5.7%, but this was tempered by a fall in full time employment. The AUD was softened by the news, slipping below 0.7700, while the NZD jumped to 0.7225. Markets are very bullish and this is likely to continue, although action must follow rhetoric in the US.
Posted on 17 Feb
Collinson FX Market Commentary - Feb 16 - Markets have a gay day
AUD looking at 0.7700, while the NZD jumped to 0.7200 The market rally continued with gay abandon, while Trump met with BB Netanyahu at the White House, turning his attention to a peace solution in the Middle East. He also found time to meet with Retailers, for the first time, which was welcomed with a strong rally in Retail Sales.
Posted on 16 Feb
Collinson FX Market Commentary - Feb 15 - US touts interest rate rise
The AUD slipped back to 0.7640, while the NZD dipped below 0.7150, also hit by a bullish reserve. Fed President Yellen made her bi-annual appearance in front of congress informing them of expected rate rises during the current year. She cited growth and inflation as the reason for interest rate rises and that it would be wise to address them sooner rather than later.
Posted on 14 Feb
Collinson FX Market Commentary - Feb 11 - Kiwi flounders as AUS surges
The blow dealt by the RBNZ has been sustained, with the currency floundering below 0.7200 The blow dealt by the RBNZ has been sustained, with the currency floundering below 0.7200, while the AUD marches towards 0.7700. This has provoked a sudden and substantial reversal in the cross rate. The coming week sees an avalanche of global economic data releases although it is hard to see Trump not dominating markets.
Posted on 11 Feb
Collinson FX Market Commentary - Feb 10 - NZD collapses on RBNZ stall
The NZD fell from above 0.7300, to trade 0.7175; the AUD remained steady, trading around 0.7625 The RBNZ left rates unchanged, in their latest Monetary statement, shifting the bias from easing to neutral. Many expected a more bullish approach to interest rates, but the Central Bank predicted no action until 2019. This did not gel with reality. This reading of the monetary situation triggered a collapse in the NZD, which fell from above 0.7300, to trade 0.7175!
Posted on 10 Feb
Collinson FX Market Commentary - Feb 9 - All quiet on US front
The Dollar was steady, with the EUR trading below 1.0700, while the Yen holds around 112.00. A quiet night of trade on equity and currency markets with little economic data releases or action on the Trump front. Trump is still immersed in the immigration ban and pushing for his Cabinet approvals in the Senate. You can't keep a good man down for long so we can expect more fireworks to impact markets.
Posted on 9 Feb
Collinson FX Market Commentary - Feb 8 - No rates move from RBA
The AUD drifted lower to 0.7625, while the NZD consolidated above 0.7300, boosted by a strong inflation report. The RBA left rates unchanged, as expected, leaving the interest rate differential the potential to close on Fed rate rises. The AUD drifted lower to 0.7625, while the NZD consolidated above 0.7300, boosted by a strong inflation report. The NZ Dairy auction also booked marginal gains, allowing the currency some license, on the upside.
Posted on 7 Feb
Collinson FX Market Commentary - Feb 7 - AUD depressed ahead of RBA
The AUD traded around 0.7650, depressed after weak Retail numbers, ahead of the RBA rate decision. The AUD traded around 0.7650, depressed after weak Retail numbers, ahead of the RBA rate decision. The Central Bank has left rates unchanged for months and no action is expected. The NZD tests 0.7300 and is likely to trade on reserve strength with some local Central Bank speculation to drive daily moves.
Posted on 6 Feb
Collinson FX Market Commentary - Feb 4 - Jobs jump in US
Commodity currencies were steady, with the AUD holding 0.7570, while the KIWI pushed 0.7300. Commodity currencies were steady, with the AUD holding 0.7570, while the KIWI pushed 0.7300. The coming week will deliver decisions from the RBA and RBNZ, although expectations are low, for any action. The US is looking at rate rises in the coming year, which will filter through to local trans-Tasman Central Banks, but not until later in the year.
Posted on 6 Feb