Collinson FX Market Commentary- June 28, 2014 - Directional changes
by Collinson FX on 30 Jun 2014
Collinson FX market Commentary: June 28, 2014
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Whitbread Round the World race winner, Steinlager II (NZ Sailing Trust) - Start ANZ Fiji Race, June 7, 2014 © Richard Gladwell www.photosport.co.nz
Equity markets closed on record highs again with a delusional belief in an economic recovery but a massive mountain of Central Bank liquidity expanding the equity bubble. French GDP growth slipped back to zero, confirming the absence of an economic recovery, while the UK managed 0.8% growth with an annual rise of 3% GDP.
The GBP is in recovery mode as they have avoided the disaster of the EURO and battle back slowly to a recovery. Europe remains under extreme pressure and the ECB and single currency fundamentally flawed, detroying any chance of a robust economic recovery. The GBP holds above 1.7000 and the EUR trades 1.3650.
The week ahead has many reasons for some quantum directional changes, with important Employment data out in the US, while the ECB and RBA rate decisions ensure Central Banks dominate. This should be a massive week, but shortened, with the Independence Day holiday on Friday in the USA!
Collinson FX market Commentary: June 27, 2014
The control Central bankers have over markets was on full display overnight with the Bank of England Governor Carney and Fed member, James Bullard, driving market sentiment. In the UK the Governor clarified earlier comments and signalled the Bank was ready to end 'QE' turning the cycle direction.
The GBP regained some lost momentum and surged to back through 1.7000,leapfrogging the EUR, which struggled to hold 1.3600. In the US, Bullard, frightened markets with a commentary warning of interest rate rises as early as the first quarter of 2015! He pointed to targets being met, in terms of both Inflation and Employment, and foreshadowed a rising interest rate environment. Stocks moved lower,at the prospect, but he is a non voting member while Yellen remains a staunch Dove.
The KIWI is flying high, moving up to 0.8770, fuelled by the growing and attractive interest rate differentials. RBNZ Governor Wheeler is suffering collateral damage from his hawkish and presumptuous monetary policy moves. This has long been an error of NZ Central Bankers, acting without patience, thus causing unnecessary volatility and pressures on the currency.
The trade data will be released today and the higher costs of capital will impact economic activity and adversely impact trade through a surging currency. The AUD is hovering around 0.9400 and without domestic pressures remains susceptible to external pressures..
Collinson FX market Commentary: June 26, 2014
A horrific US GDP number failed to quell the enthusiasm investors have for equities. The avalanche of liquidity, provided by Central banks, means that it has to go some place and equities are the place of least resistance. Shares continue to provide attractive returns compared with bonds.
The first quarter GDP was revised back from a contraction of 1%, to almost unbelievable negative 2.9%, a five year low and a contradiction to the economic recovery conspiracy theorists!? This completely busts the recovery premise, although markets shrugged this off, as historical data and a one off due to weather conditions and Obamacare.
Durable Goods Orders also contracted 1% and economic progress seems to have hit the proverbial wall. The EUR inched back,with attractive yields, overcoming the train crash that is the single market. The Currency rebounded above 1.3625, while the GBP slipped below 1.7000, in a reversal of recent trends. The AUD drifted back below 0.9400, after the political contradiction of the year, confused many and not just in Australia!
Mining billionaire and balance of power holder, Clive Palmer, announced an apparent ' road to Damasacas' moment. Al Gore, Global Warming fanatical alarmist and crusader, appeared with Clive and endorsed his policies!
Palmer announced the end to the Greens holy grail, the carbon tax, but announced retention of some climate measures and the dream for an ETS. This is comedy hour and further destroys the reputation of Gore appearing with the confused bull, charging through the Australian political china shop, wreaking havoc.
The KIWI regained yesterday's losses and surged back to 0.8730 with interest rate differentials providing incentives to international investors. The gloss will start to fade on the global rock star economy as the misguided and deluded RBNZ impacts the economy with aggressive and destructive interest rate hikes.
Collinson FX market Commentary: June 25, 2014
Equities were mixed again overnight but were perched at record levels due to growing economic confidence. The hand brake is the Geo-Political developing crises in the Middle East and the Ukraine. The Middle East has the ability of igniting the whole region which would be catastrophic for oil and the global economy. The Ukraine has the potential to impact an already impaired European economy.
German IFO Business Confidence slid overnight with the Dollar reversing recent losses as the EUR slipped below 1.3600. The Bank of England failed to inspire confidence and halted recent gains in the currency as the GBP slipped back to 1.6970. Housing numbers finally gave markets some hope in the US after yesterday's gains in Existing Home Sales were reinforced by New Home Sales and Home Prices. NHS leapt 18.6% and S&P prices rose 10.80%! Consumer Confidence also jumped confirming recent data.
Surprising then that equities did not continue the inexorable march upwards? The Geo-Political issues remain the threat with the disturbing GDP numbers also spreading some nerves. Philly Fed President, Plosser, observed economic targets were approaching faster than expected thus lending some support for the Dollar. The commodity currencies also slipped due to gains in the Reserve. The AUD gave up 0.9400 and the NZD slipped below 0.8700.
Collinson FX market Commentary: June 24, 2014
Equity markets drifted off last weeks record highs with fears over Geo-Political crises undermining recent gains. Chinese Manufacturing expanded back above the all-important '50' mark, rising from 49.4 to 50.8. This boosted Asian markets and the associated commodity currencies with the AUD rallying back above 0.9400.
The NZD also managed gains supported by improving Credit Card spending boosting retail but rising interest rates should impact the consumer. The KIWI holds 0.8700. European markets fell after manufacturing and services PMI dropped lower in France, Germany and the EU. Hardly surprising for the socialist basket case that is the bureaucratic lead EU and the ECB!
The EUR traded around 1.3600, reflecting the state of the single market, while the GBP battled back to 1.7025. The gloom spread to the US with Iraq and the Ukraine both threatening global disruption. Existing Home sales rose 4.9% and manufacturing also booked gains but the wall of bad news threatens to overwhelm. All eyes remain on the the emerging crises and any major distortions in economic data releases.
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