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Collinson FX Market Commentary - Oct 18 - Dow hits new high

by Collinson FX on 18 Oct 2017
Topaz - J- Class Regatta - 35th America's Cup - Bermuda June 17, 2017 Richard Gladwell
Market Commentary - Oct 18 - Dow hits new high

The Dow burst through a new record high, 23,000, going from strength to strength. US economic data continued to confirm the strong economy. The NAHB House Market Index grew, while Industrial and Manufacturing Production was steady, as NAFTA negotiations progress. NAFTA is crucial to Mexico and Canada, although the Canadian trade surplus is considerably less than the Mexicans. Mexico has a lot to lose, so negotiations will be serious and purposeful.

The EU is said to be ready to negotiate a post-Brexit trade deal, which is a massive development, while UK economic data remains strong.

The GBP traded 1.3180, after steady inflation data and bullish commentary from the Bank of England Governor. The EUR drifted to 1.1770, after softer sentiment reflected in the important ZEW report, although the Geo-Political risks from Catalan independence remain.

NZ CPI numbers boosted the NZD back to 0.7200, but the RBNZ ruined that scenario citing static inflationary pressures, prompting the NZD to fall back to 0.7150. The RBA released their minutes, which observed tightening monetary policies in many developed countries, but confirmed 'rates would remain low for some time'!

The RBA named threats from continued high household debt and a strong currency, which allowed the currency to soften and trade 0.7830. The soap opera starring Winston Peters and NZ First continues.

Market Commentary - Oct 17 - Quiet uncertainty

A quiet start to the week, with little economic data being released globally, although many Geo-Political events threaten. China CPI drifted lower, to 1.6%, hitting growth prospects and commodity demand. This translated directly in to the associated currencies, with the AUD drifting back to 0.7850, while the NZD slipped to 0.7160.The AUD awaits Consumer Confidence data this morning, while the NZD will be impacted by CPI numbers, still all awaiting a decision on the Government.

Geo-Political events threaten around the world, with Catalan independence coming to a head Thursday, while PM May heads to Europe to break the Brexit deadlock. The EUR slipped under 1.1800, while the GBP traded 1.3240, whiplashed by Brexit speculation. In the US there is always action, with Trump in charge, as he campaigns for the all-important tax reform and NAFTA re-negotiations.

The NAFTA re-negotiations are central to the Mexican and Canadian economies, thus driving their currency movements, reflecting the impact this trade agreement has on their economies. This has been the Trump trade doctrine, fair trade, which has dominated his global attitude to trade.

Local NZ trade will continue to be dominated by the 'Kingmaker' and speculation over the direction of the NZ Government?!

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