Collinson FX Market Commentary - Sept 25 - The price of Brexit

by Collinson FX on 26 Sep 2016 Collinson FX Market Commentary - Sept 25 - The price of Brexit

Sept 25 - European economic data was benign, as expected, with Manufacturing/Services/Composite PMI data flat. French GDP contracted and promises of a future, without Britain, is not bright. The EU has brought in many members, over the years, but most are net 'takers'.

Britain was the second biggest contributor to EU's socialist largesse and this must be replaced by onerous taxes on the remaining members. This can only result in expanded taxes and a dampener on non-existent growth. Meanwhile the UK explores trade deals with the rest of the world, with previous commonwealth nations cueing up, reverting to the once great trading nation status.

The EUR traded 1.1230, while the GBP fell back below 1.3000, as the Dollar rallies. The reserve momentum impacted the commodity currencies, with the NZD falling to 0.7230, while the AUD drifted back towards 0.7600. The coming week will look at growth through GDP and CPI numbers.

Collinson FX Market Commentary - Sept 23 - USD continues to sag
Sept 23 - The ECB and RBNZ continued the inaction of the Fed and the Bank of Japan. The RBNZ has left rates unchanged and seemed content with local economic conditions. The Jaw-boning of the currency continued, but to no avail, as the currency holds around 0.7300.

The NZ Central Bank is seven years behind the cycle and has failed at every juncture. A cushion of interest rate margin has been maintained throughout the whole economic cycle, all the while complaining about the currency??

Mario Draghi has followed the course of other Central Banks, content to allow the failed current monetary policy to preserve the status quo, happy with a failed currency.

The Dollar continued to give ground, post-Fed, with the EUR regaining 1.1200 and the GBP 1.3080. Commodity currencies regained momentum, in the face of a flagging reserve, with the NZD clinging on to 0.7300. The AUD has pushed above 0.7650, but drifted in late trading, despite a weakening Dollar.

Collinson FX Market Commentary - Sept 22 - Bank flicks policy
Sept 22 - Markets were dominated by the Fed and the Bank of Japan overnight. The BoJ was the first cab off the rank, announcing a complete upheaval of the Banks Central Bank monetary policy. The attempt is to control asset growth and interest rates through monetary manipulation.

The Fed followed, later in the day, by inaction. The deferment of any interest rate hike will continue, despite the rhetoric, with little chance of action with the Presidential election in November. The weak economic situation, globally, prevents the Fed from acting. This allowed the Dollar to meander, with the EUR trading 1.1180, while the GBP approached 1.3000.

The weaker reserve pushed commodity currencies higher, with the AUD testing 0.7600, while the KIWI consolidates above 0.7300. The focus returns to economic data and the impact this has on Central Bank speculation.

Collinson FX Market Commentary - Sept 21 - Dairy Auction stunts KIWI
Sept 21 - US Housing starts fell 5.8%, while Building Permits contracted 0.4%, adding to the market speculation on possible Fed inaction. The Fed is expected to excuse any interest rate rises as economic data releases have been disappointing.

The Dollar remained steady, with the EUR trading 1.1150, while the GBP slipped below 1.3000. The New Zealand Dairy Auction revealed a halt in recent rises, stunting the currency, with the KIWI attempting to hold 0.7300.

Australian consumer confidence was steady, which was reflected in the currency, which traded around 0.7550. All eyes remain on the Fed and the Bank of Japan!

Collinson FX Market Commentary - Sept 20 - Bloomberg bats for KIWI
Sept 20 - The week to come is probably going to be unexceptional, in terms of data release, allowing analysts to speculate on Central Bank activity. Equity markets remained steady, while the Dollar gained some ground, allowing markets to settle.

The EUR slipped back to 1.1180, while the GBP held 1.3000, under extreme pressure after recent rallies. Bloomberg has come in to bat for the KIWI, offering justification for the relative currency strength, citing the 3.6% GDP number.

This will undermine any argument the RBNZ has to cut further, but look at comparable interest rates?? The NZD trades around 0.7300, while the AUD holds around 0.7550, fighting a rising reserve.

Collinson FX Market Commentary - Sept 18 - RBNZ decision factored in?

Sept 18 - US inflation data was flat, telegraphing inaction from the Fed, contrary to inane rhetoric. Equities reacted by slipping, seemingly exhausted with all the liquidity, while the Dollar regained momentum. The EUR slipped back to 1.1150, while the GBP tests 1.3000, on the downside.

The Pounds momentum seems to be in reverse, with the Dollar aiding to the dovish Bank of England monetary policy. The coming week will not be a huge one for economic data releases, so expect further speculation, with regards Central Bank activity. The AUD fell below 0.7500, while the NZD dropped to 0.7250, perhaps anticipating the coming RBNZ rate decision!?

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