Collinson FX Market Commentary- Apr 18 - ANZACs settle in together

by Collinson FX on 20 Apr 2015 Collinson FX market Commentary: April 18 2015 - Oil prices surge

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Apr 18 - Global equities suffered a major correction to close the week, beginning in Asia and gathering momentum through European and finally US markets.

The IMF warned Greece that they would not miss debt repayments and downgraded global growth prospects. The Grexit looks more likely and considering the damage the tiny economy has imposted on EU and global markets, many would be relieved. Asian markets did not take this news well and some regulation on equity financing on Chinese markets added to the sell-off.

EU and US inflation was flat confirming the lack of growth but economic data was largely ignored with the macro wave sweeping equity markets. The EUR held 1.0800, while the GBP crept to 1.4950, confirming weakness in the reserve.

Commodity currencies consolidated gains with the AUD settling just below 0.7800 and the NZD around 0.7700. Global fears dominate big market moves and overwhelm insipid economic data while Central Bank intervention confirms the parlous state of global markets.

Collinson FX market Commentary: April 16 2015 - Oil prices surge
Apr 16 - Oil prices surged overnight and equities were going along for the ride. Oil reached US$56/barrel and boosted energy stocks reviving the recent rally. The Feds Biege Book was bleak, revealing mixed Retail sales and weak Manufacturing across all measured areas. This confirmed the economic weakness, supported by recent data releases, and further delayed prospects of interest rate rises.

The ECB continues to advocate for the QE until inflation reflects growth through liquidity expansion. The Dollar was impacted by speculation of reticence on behalf of the Fed to raise rates and commitment from the ECB to QE. The EUR jumped to 1.0675, while the GBP leaps to 1.4840, fueling equities. Chinese GDP and industrial Production was exactly as predicted and thus allowed a surge in commodity demand.

This enabled the associated currencies, with the AUD moving up to 0.7655, while the NZD is again looking to test 0.7600. Economic data is weak globally and Central Bank monetary policy remains the driver in currency, equity and bond markets..

Collinson FX market Commentary: April 15 2015 - All rise against indicators
Apr 15 - Equities turned positive overnight after absorbing the bad news from the Chinese trade data. Oil continued to improve, pushing north of US$53, contradicting recent commodity prices. EU Industrial Production rose 1.1% for the month and 1.6% annualised.

This was good news from a zone under fire, although QE has injected a sense of hope, boosting equities and bonds. The EUR moved back to 1.0650, while the GBP jumped to 1.4780, after flat CPI numbers confirmed flagging growth.

The IMF downgraded growth prospects in Australia, prompted by falling Chinese demand and corresponding drops in commodity prices, lending to recent currency weakness.

The NZD pushed back above 0.7500, while the AUD managed to regain 0.7600, beating macro-economic indicators.. Interest rate differentials continue to support the commodity currencies and sustain trade disadvantage. Will the RBA and RBNZ join the currency wars and cut rates, confronting pressures from trading partners monetary policies.

Collinson FX market Commentary: April 14 2015 - China Trade shock hits KIWI

Apr 14 - The trade balance collapsed with Exports contracting by 15% and Imports 12.7%! This massive derailment of trade may be a aberration but was enough to shock markets. The World Bank warned of the impact on Iron Ore prices which immediately hit the AUD. The commodity currency plunged to 0.7570, while the KIWI dropped to 0.7430, reflecting the dependent nature of their relationship with China.

Equities are testing technical highs, with Global QE, while the currency wars are dominated by the resurgent Dollar. The Dollar has been booking strong gains as the Feds move from QE to a rising interest rate environment. The EUR dipped to 1.0565, while the GBP slipped to 1.4670, reflecting the monetary cycle of Europe as compared to the USA.

Global economic slowdown may be arrested by aggressive monetary policy but that would require a reaction from economies not reflected in the US experience. US earnings are expected to be hit by a rising Dollar, thus adding to record, upward pressures. Look closely at global demand and commodity prices, for direction in the associated currencies, while more directly at local Central bank interest rate cuts.

Collinson FX market Commentary: April 13 2015 - KIWI gears for interest cuts
Apr 13 - European equities tested record highs as markets reacted to the flood of liquidity from the ECB. Record low interest rates and oceans of cheap money has triggered an avalanche of investment in equity markets. This is a mirror image of the US economy under QE and will have the same impact. UK industrial Production and Manufacturing were lower and GDP was static.

This is a reflection of an economy suggesting anaemia rather than resurgent economic growth. The GBP reacted accordingly and dropped to 1.4630, while the EUR tested below 1.0600. It appears inevitable the single currency will trade below parity in the coming months. The US market is in a post-QE economy (although the money supply remains at record levels) awaiting the anticipated surge in economic growth. This will trigger interest rate rises from the Fed to avoid inflation, but do not hold your collective breath.

Commodity currencies are holding current levels, in spite of a resurgent Dollar, supported by attractive interest rate differential. This will continue until the RBA and RBNZ commence their own QE program's. The AUD remains below 0.7700, while the KIWI trade 0.7515, gearing up for interest rate cuts and currency wars. A failure of the NZD/AUD cross to achieve parity may form a ceiling.


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