Collinson FX Market Commentary - Dec 14 - Interest rates move north?

by Collinson FX on 13 Dec 2016

Start of PIC Coastal Classic - October 21, 2016 - Richard Gladwell www.photosport.co.nz

Collinson FX Market Commentary - Dec 14 - Interest rates move north?

The FOMC began their two day meeting for the last time this year and markets fully anticipate a turnaround in monetary policy. Expectations are high that QE is on the way out and interest rates will begin to move north. The market has already moved, with bond yields steadily rising, pushing the Fed to action.

Six month ago this would have pushed equities lower, but today positive economic sentiment and confidence, result in surges in equity markets. The DOW is in sight of an important landmark, 20,000, making every post a winner. The Dollar has not moved. With the EUR trading 1.0640, while the GBP sits just below 1.2700. CPI data in Germany and the U.K. were flat, reflecting the struggle in European markets, putting them in a different cycle than the booming US.

Chinese Industrial Production and Retail Sales were steady, supporting commodity demand and the associated currencies. The NZD traded around 0.7200, while the AUD attempts to regain 0.7500, despite weaker local home prices. Markets keenly await a rise in rates from the Fed.

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Collinson FX Market Commentary - Dec 13 - Soft USD floats all boats

Global markets got off to a slow start to the week, with a dearth of economic data releases, allowing a focus on the coming Fed rate decision. US Bond yields continued to climb, driving expectations for the Fed to raise interest rates, putting pressure on Yellen.

This has hatched a bull-run in the Dollar, which has gained ground, only to take a breather to begin the week. The EUR pushed back to 1.0640, while the GBP has jumped to 1.2700, confirming some profit taking. Commodity demand has been growing, boosting the associated currencies, but kept in check by the rising reserve.

The softer Dollar allowed the AUD to push back towards 0.7500, while the NZD climbs back to 0.7200, political continuity restored with the elevation of PM English. Focus will remain on the Fed rate decision and associated rhetoric.

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