Collinson FX Market Commentary - May 25 - RBA Governor spooks markets

by Collinson FX on 26 May 2016 Collinson FX Market Commentary - May 25 - RBA Governor spooks markets

May 25 - Equity markets were unperturbed by the prospect of tighter US monetary policy with the S&P500 up 1.3% overnight. The USD continued to rally, trading 1.1130 against the EUR and 1.4620 against the GBP. The Pound was supported by the latest poll showed that older voters, who are more likely to vote and who previously backed leaving the EU, are switching sides to the Remain camp.

The EUR was weakened by negative German economic sentiment, losing value across the board. A speech by RBA Governor Stevens yesterday supported AUD weakness pushing the currency lower still to trade as low as 0.7145 overnight but has recovered some ground this morning.

This weakness across the Tasman spilled over to the NZD currently trading 0.6720 but the fall was not as great, pushing the NZDAUD cross up towards 0.9400 overnight. It has come back a little to trade 0.9355 this morning. The NZ Trade balance data is out today but is likely add volatility to an already volatile market. We look to the NZ budget tomorrow for further direction.

Collinson FX Market Commentary - May 24 - Green pastures in store?

May 24 - The conversation overnight was the US Fed members commentary. The Fed members from San Francisco and St Louis both had public speeches and confirmed rate rises were on the cards.

San Francisco Fed President, John Williams, foresaw two or three this year and three or four in the following. Unless this guy can actually see a pathway for a change in direction for the country, then he is dreaming! He needs to look at the Japanese experience of debt denial and fiscal ineptitude that caused economic stagnation for a generation!

The current Western strategy is to continue fiscal largesse and build the debt, made possible through globally loose monetary policy. An economic cycle has passed, and we are in economic 'irons'!

In Europe, the French Manufacturing PMI data slipped lower, while the German data held, although Europe-wide the PMI contracted. The EUR traded 1.1200, while the JPY slipped below 110.00. Commodity currencies remain under pressure, with the AUD holding 0.7200, while the KIWI trades around 0.6750.

If the Feds sentiment is correct and an economic renaissance is underway, then green pastures are in store. This should provide boundless demand for commodities and happy days! Delusion is a serious condition.
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