Collinson FX Market Commentary- October 24, 2014 - Braked too soon

by Collinson FX on 25 Oct 2014 Collinson FX market Commentary: October 4, 2014

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Oct 24 - Equities surged across Europe and the US supported by promising signs from PMI data. German and EU PMI rose for Services, Manufacturing and Composite thus giving European equities a boost. European Consumer Confidence remained in the dungeon but this failed to dampen market enthusiasm.

US Leading Index rose, as did local PMI data, endorcing European confidence. Caterpillar beat all earnings forecasts with a boom in construction equipment sales in the US. This is a great sign for the industry and contradicts recent data. The USD rallied with the EUR 1.2640, while the GBP slipped back to 1.6020, after disappointing retail data. NZ CPI was lower than expected, coming in at 0.3% for the quarter, 1% annually.

Cost of living is on the rise so this inflation number is a sad reflection of the impact of the RBNZ monetary policy. The brakes were put on too soon and too hard! The KIWI is under attack from their Central Bank but interest rate differentials remain supportive.

The NZD held 0.7820, while the AUD/USD traded 0.8750, with some improving Chinese Manufacturing data. Confidence remains under threat from Geopolitical issues.

Collinson FX market Commentary: October 23, 2014
Oct 23 - The ongoing threat of terror attacks was highlighted overnight with an attack by a gunman at the parliament building in the Canadian city of Ottawa (still developing). Geopolitical issues kill confidence and spread fear through the markets. The Dow fell, in lock-step with commodity prices. Oil prices continue the march lower with falling demand and apparent conflict among the usually solid OPEC.

The EUR fell to 1.2640 while the GBP slipped to 1.6050. The CPI in the US was steady on 1.7%, reflecting the lack of growth but not cost of living, as it should. Inflation data in the US does not include energy prices and other fundamentals to real costs to the citizens. Australian inflation was also benign, holding steady on 2.3%, and just 0.5% for the quarter.

Australian CPI contains energy and this quarter included the fall in electricity prices as a result of the removal of the maligned 'carbon tax'.. The AUDUSD held steady at 0.8780 while the NZDUSD traded around 0.7915. Geopolitical issues remain a serious threat to stability and market confidence. The NZD will today be lead by the Q3 CPI data out at 10.45am, expectations are for a dip to 1.2%q/q

The NZD currently trades 0.6255 and 0.4915 against the EUR and GBP, slight gains on yesterdays opening and both look to be good buying at these levels.

Collinson FX market Commentary: October 22, 2014

Oct 22 - Global equities rallied strongly overnight with speculation of an extension to the Fed's QE and an embellishment from the ECB. Central Bank intervention is the only reason for a recovery in equities while commodities continued their tortured run.

The serious problems continue to swamp markets, with Europe in virtual recession, while global demand is on the wane. Chinese GDP was steady but is a long way from the 10+% that dragged the global economy and supported commodity demand. Chinese Industrial Production was steady but not to the extent that it boosted commodity demand. The Slipping USD did support the associated currencies, with the AUDUSD again testing 0.8800, while the KIWI awaits further carry trade.

The NZDUSD looked to do gathering strength for another attempt at 0.8000, supported by attractive interest rate differentials, before taking a turn for the worst to trade 0.7935. US Existing Home Sales managed a gain, contradicting recent data, boosting equities while the currency traded 1.2725 versus the EUR and 1.6120 against the GBP. Central Bank speculation and Geopolitical activity continue to drive equities, commodities and currencies. In an erratic night of trading the NZD fell off against the USD but managed to book gains against the EUR and GBP to trade 0.6220 and 0.4910 respectively.

Recent history supports increasing downside risk for the KIWI with gains hard earned and ground out, while losses are happening in a flurry. Protecting your currency exposure on the downside is very important in the environment. Those chasing aspiration highs need to consider the worst case scenario and protect positions against it.

Collinson FX market Commentary: October 21, 2014
Oct 21 - Markets were mixed overnight, although all of the bad news that was there over the last few weeks, is still there! European markets were lower, as was the Dow, but the Nasdaq and S&P tried to push in to the positive. The Geopolitical crises continued unabated despite the Ebola virus seemingly being temporarily contained.

IBM is a major component of the DOW and shares plunged to open the week, struggling to cope with technological advances, being left behind by the likes of Google and Co. Apple, conversely, jumped ahead of earnings released after the close.

The Dollar continued to retreat under the expected extension of the Fed's QE. The EUR moved to 1.2800, while the GBP booked further gains, to trade 1.6160. Commodity prices remain weak, but the flagging reserve boosted the AUD back towards 0.8800 and the KIWI to 0.7950, despite a fall in consumer confidence.

Central Bank speculation and commentary remain the primary market determinant although Geopolitical surprises remain a constant risk. The NZD currently trades 0.6200 and 0.4905 against the EUR and GBP. The big winner overnight was the NZDJPY cross, tempering around the 85.00 figure and looks to be good buying.

These improvements for the NZD could be short lived and any buy side transactions in foreign currency should be looked at today to take advantage of these gains. Pressure still remains on the downside for the KIWI and market conditions do not suggest improvement. Those who wait and are greedy could get burned.

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