Collinson FX Market Commentary- August 30 2014 - The week ahead

by Collinson FX on 31 Aug 2014 Collinson FX market Commentary: August 30, 2014

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European inflation and Unemployment were stagnant, endemic of the Eurozone, while Italian GDP continued to contract extending the recession. Economic conditions have deteriorated, since there was some school of thought that they may be through the GFC, with deficits and debt still on the rise and massive expansion of monetary policy. Wealth destruction is the result with the economies eating themselves from within.

The move away from nuclear power has depowered the German engine room and raised costs to uncompetitive levels thus pushing the whole market into the doldrums. To further complicate matters, the Ukrainian crises is pushing them into self-harm in the from of sanctions on Russia. This can only spell disaster for the single market.

The EURO decline continued, falling to 1.3125, while the GBP slumped below 1.6600. The US was quiet with the break for the Labor Day weekend but this will change next week with a plethora of economic data. Growth, Trade and Jobs reports dominate a busy week. These will all be overwhelmed by Central Bank activity from the Biege Book to Rate reviews from ECB, BofE and the RBA. Plenty to get your teeth into without even mentioning Geo-Political developments.

The NZD will start the week around 0.8350 while the AUD starts at 0.9330. Buckle your belts!

Collinson FX market Commentary: August 29, 2014

Equities drifted away from record highs over night with increased uncertainty around geo political events disturbing the rally. EU Consumer Confidence contracted while German Employment and Inflation was steady. There was little to boost market confidence, while the single currency drifted below 1.3200 and the GBP held 1.6685.

US GDP rose by 4.2%, annualized, which is in line with the previous quarter and a big improvement from the start of the year. Commodities prices rose and this supported a move up in the AUD, which traded 0.9340, while the KIWI pushes back towards 0.8400.

The domestic focus today will be the NZ ANZ business confidence survey with many expecting a second quarter of decline. The NZD is still trading well against the EUR at 0.6330 and the GBP at 0.5025, both good buying at these levels. US 'Labor Day' long weekend will mean a quiet night is expected to close the week.

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Collinson FX market Commentary: August 28, 2014
Little was happening on the economic front globally, thus the bull market stalled while the USD took a breather. The stagnant Eurozone is under intense pressure and the ECB President is threatening further monetary intervention, pushing the EUR below 1.3200 and dragging the GBP to 1.6570 despite Dollar weakness. Commodity currencies experienced a reprieve with a lax reserve.

The AUD consolidated above 0.9300, while the NZD rallied around 0.8350 despite weak economic conditions. The NZD was stimulated by the $1.2 billion announcement by Fonterra that they intend to increase production capacity in New Zealand and intend to acquire a large stake in Chinese infant food manufacturer Beingmate. They also reiterated their farmgate milk price forecast at $6/kg of milk solid, but warned of downside pressure.

The Interest rate differentials provide support for a static NZ economy while a politically unstable Australia offers no real impetus. The NZD is trading up against the EUR at 0.6315 and the GBP at 0.5020. JPY remains solid buying at 86.60. Central Bank commentary and Geo-Political issues will continue to dominate a quiet economic week.

Collinson FX market Commentary: August 27, 2014

US Economic data continued to support the growing confidence in the markets, with the S&P breaking above the '2000' for the first time. Durable Goods orders surged 22.6%, led by a boom in aircraft orders, while Consumer Confidence jumped the most seen in six years.

This follows promising recent data from the housing sector, supporting the Fed ending QE and considering interest rate rises sooner rather than later. The Dollar will be a long term beneficiary of the Fed Monetary Policy change. The EUR weakened further, to 1.3175, while the GBP traded 1.6550. NZ Trade data deteriorated with exports plunging while imports remained steady.

Commodity prices have not been great and the high interest rate policy, supporting the NZD, has not helped. This is severely denting the 'rock star' shine and raising questions over monetary policy.

The KIWI slipped after the news, dropping to 0.8330, while the AUD stubbornly held on to the 0.9300 big figure. Geo-Political developments remain the biggest threat to currency moves and Central Bank reaction to this and other economic events.

Collinson FX market Commentary: August 26, 2014
The S&P topped 2000, for the very first time overnight, with equities eating up previous records. European markets surged awash with speculation that the ECB is about to embark on their own new QE program.

The additional Central Bank stimulus is due to the dire state of European economies but this will be a huge boost to banks and equities. Not so much the EUR, which will be further diluted, by the ever expanding balance sheet.

The EUR slipped back below 1.3200 while the GBP remained 1.6580. New Home Sales in the US contracted by 2.4%, contradicting recent data, although in line with the erratic economic data releases this year. QE in the US has been hugely controversial and success will be measured with the withdrawal from the massive expansionary policy.

The AUD battled to hold 0.9300 and remains at the whim of the big Dollar while the KIWI trades 0.8340. NZ Trade data will be released today and it is hard to see any improvements with the environment created by the only contractionary Central Bank in the OECD!

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