Collinson FX Commentary: Mar 8 - Resignation sparks meltdown
by Collinson FX 7 Mar 2018 17:43 PST
8 March 2018
Day 2, Bay of Islands Sailing Week, January 25, 2018 © Richard Gladwell
Collinson FX Commentary: Mar 8 - Resignation sparks meltdown
Key Trump adviser, Gary Cohn, resigned overnight and sent markets in to a minor meltdown. Cohn was an important architect of the Trump tax reforms and behind much of the de-regulation success. He is a free marketeer and globalist, which translated, means he cannot advocate for tariffs. This lends certainty to the coming trade war and markets reacted accordingly. The ADP Jobs Report revealed strong growth in the Private Sector labour market, adding 235,000 jobs, affirming the robust labour market.
European equity markets regained some ground overnight ahead of the ECB rate decision. The ECB is expected to leave QE in place and may cite uncertainty over trade as a further excuse to endorse loose monetary policy. The EUR remained steady, trading above 1.2400, while the GBP hovered around 1.3900. All ears are await the rhetoric from the ECB.
The RBA's, Lowe, endorsed current monetary policy. He did support a rate rise, in the coming calendar year, but offered sufficient conditions to preclude action. He cited the stubbornly weak labour market and looming trade threats. This undermined the AUD, which slipped back below 0.7800, while the NZD drifted back towards 0.7250. Local markets will await Japanese GDP data, while global markets look to the Biege Book and US Jobs data.
Trade wars remain the elephant in the room.
Collinson FX Commentary: Mar 7 - Pressure on AUD
US equity markets continued to book gains despite worries of a trade war looming. European markets also managed to recover, despite the Italian election result, which unsettled many. Mainstream left and right political parties were the big losers, while anti-establishment parties won the day. Anti-EU parties were the major beneficiaries, which continues the trend, following 'Brexit'.
US Factory Orders and Durable Goods Orders both contracted, which is not a great sign for domestic consumer demand, reiterating that the economy may be starting to come off the boil? The Dollar drifted back, with the EUR breaking above 1.2400, while the GBP tests 1.3900 once again.
The RBA left rates at record lows (1.5%) and signalled an intention to maintain that position until inflationary pressures become more consistent and wage growth more convincing. The dovish outlook does not inspire a rally in the currency. Australian trade data deteriorated, with a current account blow-out, while Retail Sales remain flat. This all adds up to downward pressure on the AUD, but the softer reserve, allowed the currency to recover to 0.7820. The NZD had more reason to improve, with slightly better Dairy and Home prices, allowed the softer Dollar to drive the NZD back towards 0.7300.
Trade remains the 'hot topic' although the ECB and US Jobs reports remain key to daily fluctuations.
Collinson FX Commentary: Mar 6 - Trade-war fears ease
The fear of an imminent trade war subsided overnight, with US equities regaining some lost ground, while Trump qualified his stance. Trump tweeted that tariffs would not be necessary if trade agreements (in particular NAFTA) were satisfactorily re-negotiated. The huge trade deficits the US suffers will need to be addressed. The US will continue to negotiate from a position of strength, while their major trading partners have a lot more to lose, thereby encouraging them to consider their positions. Services and Composite PMI data was static across Europe, Asia and the USA, with the exception of the UK, which showed some gains. The GBP pushed back to 1.3850, while the EUR floundered, trading 1.2330. NZ Commodity Prices were stronger, but this had little impact on the currency, which drifted to 0.7220. Australian Building Approvals jumped by over 17%, giving the local market some confidence, with the AUD recovering to 0.7750. The US Dollar has traded quietly, during the latest banter over trade wars, but strong interest rate pressure will impact the currency.
Collinson FX Commentary: Mar 5 - Trade-wars hit markets
The 'Trade Wars' dominated the close of international markets for the week. Asian and European markets took major hits as the prospect of US Tariffs on exports sunk in. The imposition of tariffs will have a massive impact on Asian and European Exporters and markets reflected this. The threats of retaliatory action came thick and fast, but considering many have surpluses with the US and are trade dependent, Trump is in the box seat. He announced that 'Trade wars are good and easy to win'. The Dollar retreated, with the EUR jumping to 1.2320, while the Yen moved to 105.60. The coming week has important rate decisions from the ECB and The BOJ, which are likely to extend QE, although rhetoric will drive currencies. Global growth data and US Job reports will have a major impact on markets throughout the week. The trade wars are likely to dominate market conversations.
Collinson FX Commentary: Mar 4 - Tariff time in US
The big news overnight in the US, was the imposition of tariffs on steel and aluminium and the appearance of Fed Chair Powell in front of the Senate. This triggered another slide in equities. Tariffs raise the prospect of trade wars between America and her trading partners.
The evolving trade policies of the Trump administration, has sparked fears of trade wars and lower global trade. Trump has extolled the virtues of bi-lateral trade, as opposed to multilateral, which have been inflexible and fundamentally unbalanced. The steel tariffs have been imposed by previous administrations, but the fear is that it is only the beginning of a raft of tariff imposition, forcing the world into a more closed global markets. This hit equity markets. Fed Chair Powell appeared in front of the Senate and his outlook was more dovish.
He noted that there was no evidence the economy was overheating and the labour market could continue to tighten, without causing inflation. He noted that four rate rises were likely. This allowed Bond Yields to drift lower, while the Dollar remained firm. The EUR traded 1.2200, while the GBP has plunged to 1.3720, with softer economic data contradicting tighter monetary policy.
The US ISM Manufacturing data was stronger than expected but markets were focused on tariffs and Powell.
The NZD was the only currency to buck the trend and rebounded to 0.7220, while the AUD fell to 0.7720, undermined by weak Capex data. Trump and the Fed dominate markets although the pressure has been released on interest rates and that may flow through to a recovery in equities?
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Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |