Collinson FX Market Commentary - July 12 - Greeks out of the spotlight

by Collinson FX on 12 Jul 2015 Collinson FX Market Commentary - July 12 - Click here to find out how to get CollinsonFX's free iPhone app

July 12 - Yellen spoke and markets listened! The Fed President confirmed the intent of an interest rate rise and highly convincingly! The Dollar collapsed, as highly cynical markets, completely discounted her diatribe. Perhaps the 'escape clause' in her verbosity gave many a reason to brush aside intention.

Yellen inserted a caveat surrounding the uncertainty in the economy which totally deflated expectations. Interest rate rises would increase, exponentially, the debt service cost to the Federal Government. Why would the Fed do that? Considering they have completely ignored economic reality for the last seven years?

The markets interpreted this as it should, caning the Dollar, with the EUR charging to 1.1150 and the GBP to 1.5500. The reserve weakness was not reflected in commodity currencies due to the crises evolving in China and the impact this has had on commodity demand. The AUD hovered around 0.7440, while the NZD consolidated above 0.6700, with attractive returns an obvious incentive.

The Greek crises will dominate the start of the week but U.S. Central Bank policy will dominate currencies.

July 9 - The NYSE crashed overnight with technical faults and this was reflected in the Index. US equities fell with worries over China and Greece adding to the confusion. Fed minutes were released, recognising the enormous correction in Chinese equities and the crises in Greece, providing an excuse to leave interest rates unchanged.

This boosted the EUR back to 1.1075, while the GBP traded 1.5365, after a bounce in local equities. The further collapse in Chinese equities is impacting commodity demand which directly hits the associated currencies. The AUD trades around 0.7425 while the KIWI staged a mini rally to 0.6705, boosted by a flagging reserve. Greece has until the end of the week, while China continues to tank, despite Government intervention.

Collinson FX Market Commentary - July 8 - Greeks bite hand that feeds
July 8 - The Greeks voted 'No' to the European austerity plan and an exit from the Euro looms. Overnight the confrontational and divisive finance minister, Voroufakis, resigned to assist negotiations.

EU leaders will now consider a new Greek proposal tonight and decisions will have to be made. Will the EU agree to conditions of further bailout loans on Greek terms, writing off previous loans and extending new ones unlikely to be ever repaid? As insane as the proposition is, it will be considered, in an effort to save the conflicted single currency.

The EUR jumped back above 1.1000, while the GBP regained 1.5600, despite falling equity markets and rising apprehension. Commodities continue to weaken in the face of global uncertainty, with the AUD battling around 0.7500, while the KIWI attempts to regain 0.6700.

The following week will be consumed by the Greek crises and developments will throw markets into disarray with volatility a certainty!


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