Collinson FX Market Commentary - May 28 - US to raise interest rates?

by Collinson FX on 30 May 2016 Collinson FX Market Commentary - May 28 - US to raise interest rates!

May 28 - Yellen confirmed that it would 'probably be appropriate' to raise interest rates in the near future with a proviso! The Fed have always had a pre-condition to raising rates, the global economic recovery, which has failed all benchmarks.

The world has missed a complete economic cycle, since the global recession, with more to come because of the global Central Bank monetary economic largesse. US GDP came in at 0.8, below expectations, historically disastrous levels.

The Dollar did stage a recovery, as the EUR moved to 1.1110, while the JPY broke back to 110.30. The rise in the reserve was reflected in the commodity currencies, with the AUD falling below 0.7200, while the NZD tests 0.6700 to the downside. The coming week provides an avalanche of economic data which will probably provide cover for the Fed!

Collinson FX Market Commentary - May 27 - KIWI bounces after Budget
May 27 - Equity markets were quiet, after recent rises, ahead of the US GDP number and Yellens address. Expectations are for Yellen to confirm improving economic conditions but leave rates unchanged until next month. Six months into the calendar year and interest rates remain on record lows. This is despite signalled rises from the Fed! The EUR dipped below 1.1200, while the yen rallied to 109.40, as the Dollar embraces QE.

The GBP fell to 1.4660, just off pre-Brexit scares, as polls indicate they will remain. The US had some stronger Durable Goods numbers and a spike in Pending Home Sales. This has given confidence ahead of the Feds meeting and the GDP number release. The growth number will be an important part of the Feds decision.

The NZD fell from a tight trading range, around 0.6750, to trade below 0.6700 after a lower than expected Dairy auction forecast price. The Budget was strong, with fiscal surplus the common theme, allowing repayment of debt in to the future. This was received well by markets, with the NZD recovering back towards 0.6750, once again. The AUD is consolidating above 0.7200, awaiting the impact of the Central Bank, on the big Dollar.

Collinson FX Market Commentary - May 26 - KIWI closes in on AUD
May 26 - Markets remained steady overnight, with equities holding on to gains, while the Dollar was relatively static. Markets still anticipate a Fed rate rise in the next month, supporting the rise in the reserve, while risk appetite rises. The EUR traded around 1.1150, while the JPY 110.50 and the GBP hit 1.4700.

The Bank of Canada left rates unchanged, refusing any temptation to cut, supporting their currency. Commodity currencies are in consolidation mode, with the AUD attempting to hold 0.7200, while the NZD builds above 0.6750!

NZ Consumer Confidence rose slightly, while trade pushed north, on the back of stronger exports. Today's Dairy price will be an early indicator for local markets. US Services PMI slipped slightly, amidst Chinese plans to control commodity volatility and fix the currency!?

Oil is closing on $50/barrel and things look rosy, although recent global economic data does not support the bullish sentiment, but time will tell! The NZ budget will be released today and any major changes to the status quo could will offer direction to the currency.

Collinson FX Market Commentary - May 25 - RBA Governor spooks markets

May 25 - Equity markets were unperturbed by the prospect of tighter US monetary policy with the S&P500 up 1.3% overnight. The USD continued to rally, trading 1.1130 against the EUR and 1.4620 against the GBP. The Pound was supported by the latest poll showed that older voters, who are more likely to vote and who previously backed leaving the EU, are switching sides to the Remain camp.

The EUR was weakened by negative German economic sentiment, losing value across the board. A speech by RBA Governor Stevens yesterday supported AUD weakness pushing the currency lower still to trade as low as 0.7145 overnight but has recovered some ground this morning.

This weakness across the Tasman spilled over to the NZD currently trading 0.6720 but the fall was not as great, pushing the NZDAUD cross up towards 0.9400 overnight. It has come back a little to trade 0.9355 this morning. The NZ Trade balance data is out today but is likely add volatility to an already volatile market. We look to the NZ budget tomorrow for further direction.

Collinson FX Market Commentary - May 24 - Green pastures in store?

May 24 - The conversation overnight was the US Fed members commentary. The Fed members from San Francisco and St Louis both had public speeches and confirmed rate rises were on the cards.

San Francisco Fed President, John Williams, foresaw two or three this year and three or four in the following. Unless this guy can actually see a pathway for a change in direction for the country, then he is dreaming! He needs to look at the Japanese experience of debt denial and fiscal ineptitude that caused economic stagnation for a generation!

The current Western strategy is to continue fiscal largesse and build the debt, made possible through globally loose monetary policy. An economic cycle has passed, and we are in economic 'irons'!

In Europe, the French Manufacturing PMI data slipped lower, while the German data held, although Europe-wide the PMI contracted. The EUR traded 1.1200, while the JPY slipped below 110.00. Commodity currencies remain under pressure, with the AUD holding 0.7200, while the KIWI trades around 0.6750.

If the Feds sentiment is correct and an economic renaissance is underway, then green pastures are in store. This should provide boundless demand for commodities and happy days! Delusion is a serious condition.
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