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Collinson FX Market Commentary - Sep 30 - NZD undermined by election

by Collinson FX on 1 Oct 2017
Topaz - J- Class Regatta - 35th America’s Cup - Bermuda June 17, 2017 Richard Gladwell
Market Commentary - Sep 30 - NZD undermined

Sept 30 - Equities will close the month of September at record highs. Confidence is high, as are expectations, with US Tax reform front and centre. The Chicago PMI jumped, to close the month on a positive note, while the first week of October welcomes an avalanche of global economic data.

The US Dollar also closed the month at higher levels, with the EUR testing 1.1800, while the GBP slipped below 1.3400. Trump met with former Fed Governor Kevin Warsh, a prospect to replace Fed President Yellen, with a more hawkish perspective. EU CPI showed signs of life, confirming some growth in the ECB, allowing the global recovery narrative to continue.

The NZD trades around 0.7200, undermined by post-election negotiations, while the AUD drifted to 0.7830. The RBA rate decision, in the coming week, will provide a summary of economic conditions in the local economy and their place in the world.

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Market Commentary - Sep 28 - Uncertainty reigns supreme

US lawmakers unveiled the new tax reform package, which is essential to the Trump market rally, supporting the massive gains. The Dollar remained strong, with the EUR trading 1.1750, while the Yen moved towards 113.00. US Durable Goods Orders improved by 1.7%, while Pending Home Sales contracted by 2.6%, cementing the weakness in this essential leading sector.

The rising reserve has hit commodity currencies, with the AUD slipping to 0.7850, while the maligned NZD attempted to stabilise.

The KIWI looks to hold 0.7200, but uncertainty reigns supreme, as negotiations for a Government fail to commence. The MMP system has resulted in this uncertainty, many times and was only overwhelmed by the previous popularity of former PM, Key. Speculation remains the most popular sport in Aotearoa unsettling markets. The RBNZ decision, today, will do nothing to exasperate the situation.

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Market Commentary - Sep 27 - Kiwi confidence undermined

Yellen pushed the Dollar higher overnight with her advocation of tightening monetary policy. She welcomed stronger inflation and observed the tighter employment markets. This pushed the USD higher, in combination with the German election results, which allowed a return of Merkel under dubious circumstances.

The EUR fell below 1.1800, while the GBP drifted to 1.3440, with no positive economic data to improve the mood. The S&P Case Shiller Home Price Index posted gains, but was marginalised by a contraction in New Home Sales and Consumer Confidence. Markets remain consumed with Geo-Political issues and a lack of a strong Economic narrative. The US needs strong tax legislative action to support the massive Trump rally in markets.

The AUD drifted to 0.7880, while the NZD tests 0.7200, on the downside. NZ political uncertainty will undermine confidence, as reflected in the latest confidence data, hitting equities and the local currency.

Market Commentary - Sep 26 - Geopolitical pressure on currencies

NOKO has claimed a right to shoot down American aircraft as tensions build on the Korean Peninsula. They assert the US has already declared war on them. This ratchets up tensions and drives markets lower. Merkel looks to have won another term in office, but her party had their worst election result since WW2, while the right (AfD) stormed into the Bundestag.

The EUR fell back to 1.1850, driven by the German election results, while the GBP drifted to 1.3460. The NZ election remains up in the air, with extended post-election negotiations expected, driving uncertainty in the local currency. The NZD fell back to 0.7250, while the AUD drifted, to trade 0.7940.

Uncertainty will ensure an unstable period, highlighted by speculation and market weakness. A focus on economic data, may struggle under Political and Geo-Political pressure, globally!

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