Collinson FX Commentary: NZD jumps well above .73c
by Collinson FX 24 Jan 2018 03:41 PST
25 January 2018
Collinson FX Commentary: Jan 24 - NZD jumps well above .73c
The Bank of Japan walked past their threats of a return to normal monetary policy. The BoJ observed the economy was experiencing ' moderate economic growth' but still held fears around inflation. Inflation rolls along at zero, excluding energy, thus posing a real challenge. The BOJ thus left rates unchanged and QE in place. They cannot afford normalised monetary policy as a stronger Yen would prevent inflation rising. German and EU ZEW sentiment reports came in stronger than expected, reflecting a positive start to the year, allowing the ECB some space.
The EUR moved to 1.2280, while the GBP held around 1.3970, reflecting the reserve. Earnings are extremely strong in the US, nourished by tax cuts, allowing equities to continue the bull run. Commodities are major beneficiaries of stronger global demand with the associated currencies booming.
The NZD jumped to trade well above 0.7300, while the AUD slipped below 0.8000, allowing strong gains in the cross. Markets enjoy the boost from corporate earnings, allowing sentiment to flourish, although Central Bank influence currency fluctuations and trends alongside economic measures.
Collinson FX Commentary: Jan 23 - NZD regains .7300
US Markets remain consumed by the Government shutdown. This is the third day of the shutdown and politicians fight to apportion blame. The strategy from the Democrats is to close down the Government, while seeking to blame Trump and the Republicans, all the time holding out for an immigration victory.
A compromise is likely to eventuate sooner, rather than later, with little or no damage. The stock markets shrugged this off and continued to build on the bull run. US Bonds remain well bid and the Dollar soft. The EUR traded 1.2220, ahead of the ECB rate decision, while the GBP moved up to 1.3930. The actions of the Bank of Japan is much anticipated, with a return to a more normalised monetary policy expected, as the JPY blew back above 111.00.
Commodity currencies are enjoying a special run, with a weaker reserve and strong demand, allowing rallies beyond what their own economic realities dictate.
The NZD regained 0.7300, overnight, while the AUD continued to trade around 0.8000. Local PMI data and confidence numbers may drive early trade, although Central Bank action/speculation and economic data revelations offshore, remain the major influence.
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