Collinson FX Commentary: Feb 23 - Credit Card spend drops on swollen house prices
by Collinson FX 22 Feb 2018 18:59 PST
23 February 2018
Day 2, Bay of Islands Sailing Week, January 25, 2018 © Richard Gladwell
Collinson FX Commentary: Feb 23 - NZ Credit Card spend drops
The Fed came out with a very strong report and the 10 year bond rate spiked to a four year high. This reversed the days gains on equity markets. It was the Bond Yield spiking, that triggered the 10% market correction on share markets, but the orderly rise of rates will prevent knee-jerk reactions. The Fed were very positive about the growth prospects of the US economy and recognised the impact of inflation. This signals up to four rate rises in this calendar year. The orderly rise in interest rates is necessary to combat inflationary pressures as monetary policy returns to normal.
The digestion of the Fed minutes have resulted in sharp gains in equity markets, gradually reeling in the 'correction' losses, reflecting the strength of the US economy. The Dollar gave up the previous session gains, with the EUR trading 1.2330, while the Yen pushed back to 106.75. The Leading Index in the US rose, while the Kansas City Fed Manufacturing Activity remained strong, reinforcing the flow of healthy data.
Commodity currencies drifted, with the AUD heading toward 0.7800, while the NZD may test 0.7300. NZ Credit Card spending contracted (0.6%), but remained strong (4.6%) for the year, reflecting the consumers financial positions. Swollen property prices have allowed a false sense on wealth, which is great for consumer demand, but has encouraged aggressive debt accumulation in a low interest rate environment. Economic data will probably continue to drive the global growth narrative.
Collinson FX Commentary: Feb 22 - "Blue Sky" minutes?
Markets keenly await the Fed’s minutes, which are expected to be ‘blue sky’, with a strong labour market and economy. The Fed is likely to recognise that inflation will drive tighter monetary policy and require the need for rate rises. The market is leading the Fed there. US PMI data was at 2 year highs, reflecting the strong state of the Manufacturing, Services and Composites.
Existing Home Sales slipped back, but this was not a major concern, as it follows a string of strong data. The Dollar has reflected the monetary policy stance and the healthy economy, with the EUR falling to 1.2320, while the Yen traded 107.65.
Commodity currencies reflected the rising reserve, with the NZD drifting to 0.7330, while the AUD traded 0.7830. The Fed will dominate markets today, while equities continue to recover lost ground, post-correction. Economic data will reinforce the growth narrative and support the return to normal monetary policy.
Collinson FX Commentary: Feb 21 - A quiet opening
Markets opened quietly, after Presidents Day holiday in the US, while Chinese New Year continues. Equities were mixed and the Dollar regained some ground. The Yen moved to 107.50, while the EUR drifted back to 1.2350, amidst some disappointing ZEW Sentiment data from Germany and overall, for the EU.
US Equity markets had the 10% correction, confirming the bull-run, as economic fundamentals lend themselves to more upside.
The Fed minutes are going to confirm further rate rises, as the rhetoric changes, leading in to the new Fed regime. The NZ Dairy Auction delivered positive prices but the rising reserve pushed the commodity currencies lower.
The NZD fell back to 0.7350, while the AUD slipped back below 0.7900, confirming mixed demand and a volatile Dollar. Markets will look at growth and inflation data, which is driving the interest rate narrative, as bond yields act as the canary in the mineshaft.
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Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |