Collinson FX Market Commentary - July 19 - US Rally hits wall

by Collinson FX on 19 Jul 2017 Collinson FX Market Commentary - July 19 - US Rally hits wall

The US Dollar continued to flounder, ahead of the ECB meeting, Thursday. The EUR rallied strongly, to 1.1550, with expectations of an end to the extreme monetary policy currently in place. The GBP did not react, holding around 1.3050, tempered by lower than expected inflation data. The US NAHB House Market Index, came in lower than expected, while markets look to corporate earnings for direction.

US economic data has been soft, confirming the Feds 'pause' to the tightening of monetary policy, allowing the USD rally to hit the wall. Commodity currencies have been major beneficiaries, with the AUD rallying above 0.7900, while the NZD looks to 0.7350. The AUD has been particularly buoyant, with bullish sentiment in the RBA minutes, confirming the positive trajectory.

Collinson FX Market Commentary - July 18 - China has positive data

Chinese economic data was predictably positive, supporting the stronger commodity currencies. Chinese Retail Sales were stronger, as was Industrial Production, while the GDP came in slightly stronger than expected (6.9%). Chinese economic performance translates directly into demand driven support for commodity prices.

This allowed the currencies to consolidate after spiking at the close of last week. The AUD drifted below 0.7800, while the NZD held above 0.7300, awaiting important CPI data released today. The GBP traded 1.3050, while the EUR pushed towards 1.1500, ahead of the ECB meeting Thursday.

This will focus around the language used in the commentary as no rate hikes are expected. The US markets are closely watching earnings, which are expected to be positive, despite high valuations. A look at the RBA minutes may well impact local markets.

Collinson FX Market Commentary - July 15-16 - US Dollar hit hard
July 15-16 - US Inflation data disappointed and Retail Sales contracted. Key economic data confirms the dovish tone Yellen took in her commentary on future monetary policy before congress. The CPI number was zero, reflecting inflationary pressures and stagnant growth, which allow for a continuation of extremely generous monetary policy and a stay on rate rises.

This allowed equities to reach new record highs while the Dollar was hit hard. The EUR jumped to 1.1460, while the GBP spiked to 1.3100, as positive momentum shifts from the US to Europe. The Yen has quietly moved to 112.50 with the slow unwind of the Dollar. Commodity currencies were the major beneficiaries of the melt down in the reserve.

The AUD jumped to 0.7820, while the NZD consolidated above 0.7300, echoing the global move against the Dollar. The coming week will provide plenty of cannon fodder in the form of global economic data releases and Central Bank activity. The ECB will be a major influence, in the coming week, while RBA minutes and Employment data will drive local currency moves.

Collinson FX Market Commentary - July 14 - US Dollar drifts

Yellen appeared in front of the Senate and reiterated the previous appearance in front of Congress. The continued rise in interest rates, is expected and the contraction of monetary policy, gradual. There was nothing new in her comments which were measured and deliberate. Equities rallied to new record highs, while the Dollar drifted, despite a rally in bond rates.

The EUR trades around 1.1400, while the GBP pushed up to 1.2950, supported by steady economic data. Chinese trade expanded, with increases in both Imports and Exports, allowing a demand driven rally in commodities. The associated currencies responded accordingly, with the AUD consolidating above 0.7300, while the NZD spiked above 0.7300.

Markets will now close the week with a look at inflationary pressures in the US economy, with the release of the US CPI number, while the consumers health will be tested with the release of US Retail Sales data.


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