Collinson FX Market Commentary- Jan 14 - Europe ignores reality

by Collinson FX on 15 Jan 2015 Collinson FX market Commentary: January 14, 2015

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Jan 14 - European markets defied logic and ignored reality, by moving north, although US markets confirmed reality. The GBP did not realize the gains in the incredible equity market, slipping to 1.5150, with CPI numbers dipping to confirm stagnant growth. The UK is the healthy part of a very sick economic zone. European deflation is a reality, while cost of living pressures mount, driving incomes lower and destroying wealth. The EUR slipped back to 1.1770 and looks to be on a suicide mission.

Chinese exports jumped 9.7%, while Imports contracted, giving a positive spin to trade data. This did little to support commodities, as Oil fell to US$45/barrel, killing energy companies and exporters. The AUDUSD dallied around 0.8140, while the KIWI looked to test 0.7700, on the downside.

Confidence and stability is the key to equity markets but terrorism and fiscal destitution undermine any significant gains. European confidence is a mood swing, so markets should prepare for the reality of the situation, confounding economic reality.

Collinson FX market Commentary: January 13, 2015

Jan 13 - Equities continue to tumble ahead of the US earnings season, which kicks off with Alcoa today, in the face of global terror fears and plunging energy prices. Oil shed further ground, which undermines energy companies, pushing equity markets lower but offering stimulus to net energy importing countries. Cheaper Oil is acting as a global stimulus to energy input prices and the consumer.

This should translate into improved retail consumption as disposable income expands. The terror fear does lead to greater apprehension, which may also lead to, among other things, consolidation on personal debt levels, boosting savings. The uncertainty generated in Europe, by recent events in France, is magnified by the dire economic situation. The only answer to debilitating deficit/debt scenario, is ECB expanded Monetary Policy to combat deflation, when fiscal reconstruction is required.

The EUR flounders at 1.1825, while the GBP meanders around 1.5170, in the face of a bull-run Dollar. Commodities, lead by Oil, have been devastated over a recent times and this has impacted the associated currencies and enhanced by the growing strength of the USD. The AUDUSD gave up 0.8200 overnight, retreating to 0.8150, while the KIWI slipped back to 0.7760.

Markets are extremely nervous in current economic and security conditions globally and this uncertainty undermines any significant market gains. The NZD currently trades 0.6545 and 0.5108 against the EUR and GBP. The NZDJPY is testing 92.00 on the downside, the result of an under pressure NZD and the 'safe-haven' status given to the JPY. The NZDAUD cross continued to fall overnight, dipping to 0.9500.

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