Collinson FX Market Commentary- May 6 - Aussie joins currency wars

by Collinson FX on 6 May 2015 Collinson FX market Commentary: May 6, 2015 - Aussie joins currency Click here to find out how to get CollinsonFX's free iPhone app

May 6 - Sell in May.. go away! The old adage is living up to expectations. European equities spun out overnight and Bonds issued warning signals. Holders of Government debt pressed the panic button and offloaded lucrative investments. ECB QE has stimulated the 'dead man walking' single market but cannot solve the fundamental issues plaguing the Union.

Economic data reinforces the weak state of the global economy and Central Banks do all the heavy lifting. Monetary Policy has been hugely loose, with masses of liquidity flooding markets, while failing to achieve goals. Monetary excesses should result in a surge in growth, with cheap money, which should be reflected in inflationary pressures. This has not occurred, with Central Banks pouring discounted money through banks who in turn reinvest in financial markets. Profits galore but no advantage to the real economy.

The RBA cut rates, as expected, to 2%. The commentary confirmed recent 'moderate' global growth, which is a euphemism for lack thereof! The RBA recognized the collapse in commodity prices and elected to join the stated currency wars.

'Major Central banks are stepping up the pace of unconventional policy measures' was code for the currency wars. Markets fully anticipated this move, selling in the previous week, thus leading to a profit bounce overnight. The AUD jumped to 0.7940, supported by markets interpretation of a relatively strong economy, while the KIWI traded 0.7540.

Collinson FX market Commentary: May 5, 2015 - RBA drops rate as predicted
May 5 - Chinese Manufacturing PMI continued to contract, falling to 48.9%, confirming weaker demand for commodities. This has a direct impact on demand hitting the associated currencies.

The NZD dallies around 0.7520, while the AUD slipped to 0.7830, assisted by a stronger reserve. Australian Job Ads improved and Building Permits expanded by 2.8%, some good news from an economy under recent fire, while NZ Commodity Prices fell 7.4%.

European equities booked gains, boosted by stronger Manufacturing data, in direct contrast to China. This supports improving confidence in European markets post-QE. US equity markets banked some gains and are looking forward to the all important Non-Farm Payrolls on Friday, while previews from the ADP and Challenger Jobs reports, should give insight.

The Dollar continued to recover, moving to EUR 1.1140, while the GBP slipped to 1.5110. The RBA is expected to cut interest rates, to at least 2%, while confirming a weaker economy and advocating for a lower currency.

Later today the RBA confirmed a rate drop to 2% and the AUD fell half a cent.

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