Collinson FX Market Commentary- Jan 21 - NZD drops as movie repeats

by Collinson FX on 21 Jan 2015 Collinson FX market Commentary: January 21, 2015

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Jan 21 - European equities rallied overnight, for all the wrong reasons. Haven't we seen this movie? The US has flushed the markets with liquidity, since the GFC, giving equity markets the biggest monetary boost in history. The ECB plans to do the same and flood the markets with cheap money in an effort to stimulate.

The only problem is the fundamental dysfunction of the single market. The basis of the Union is flawed and the concept is broken. The Dollar resumed the inexorable rise as the trend strengthens. The EUR slipped to 1.1550, while the GBP dropped to 1.5150, The IMF reviewed global growth forecasts lower to 3.5%, from 3.8%. Chinese growth was steady at 7.3%, but a shadow of it's former self, as leaders consolidate wealth distribution.

Commodities were not bedazzled by the insipid performance and associated currencies reacted accordingly. The AUDUSD dropped back to 0.8150, while the NZD dropped back to 0.7650, with CPI confirming the absence of growth. NZ Monetary Policy has a lot to do with the economic pickle. Dairy prices remain under pressure, exposing local dependence on this sector.

Economic conditions continue to deteriorate globally and this will be confirmed statistically. The NZD currently trades 0.6622 and 0.5040 against the EUR and GBP and has fallen bellow 91.00 against the Yen. The biggest loser overnight was the NZDAUD cross, which continued its decline from dizzy heights to trade 0.9350 this morning.

Collinson FX market Commentary: January 20, 2015

Jan 20 - Markets were slow, calm and steady overnight due to MLK holidays taken by US markets. This allowed speculation on European markets about the timing and magnitude of the ECB's QE. Massive expansion of liquidity is expected, which boosted equity markets, but undermine the currency.

German exports will be a beneficiary but higher import costs and wealth destruction will hurt the European citizens. The EUR traded 1.1600, while the GBP managed to hold above 1.5100, supported by low volume, inactive markets. Commodity currencies tread water, with the AUDUSD scrambling to hold 0.8200, while the KIWI moves to 0.7760 with glowing economic prospects according to the PM!

Markets will resume overnight after the long weekend in the US so expect action and perhaps a dose of reality. The NZD currently trades 0.6670 and 0.5125 against the EUR and GBP.

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