Collinson FX:April 24: High US expectations met
by Collinson FX 23 Apr 2018 18:46 PDT
20 April 2018
Oceanbridge NZL Sailing Regatta, Day 3, February 5, 2018, Murrays Bay SC © Richard Gladwell
Collinson FX: April 24: High US expectations met
US 10 Year Bond Yields are now testing 3%, giving pause to the equity market bull-run, while driving the Dollar upwards. The GBP fell back to 1.3940, while the Yen traded 108.50, victims of the booming reserve. Commodity currencies have experienced major reversals on recent rallies, with the NZD falling to 0.7150, while the AUD tested 0.7600. The strength in commodity prices have been overwhelmed by the rising reserve. Technical supports have been busted. The Fed has been aggressively raising rates, with intentions of more to come, driving the Dollar.
European PMI data was positive, while the US PMI was strong, across the board. US Existing Home Sales jumped 1.1%, reinforcing the data surrounding the US housing sector, after a couple of negative number releases recently. NZ Credit Card spending rose 1%, but local economic data has been buried by the US Dollar story.
US Corporate earnings are in full swing and the high expectations are being met. US Tax cuts are washing through corporate numbers but the story is being diminished by the rise in interest rates. US 10 year bond yields are testing 3% and are set to move higher, which will drive investment and increase borrowing costs. The rally in rates are high-jacking the currency market and driving the Dollar north!
Collinson FX: April 22/23: US Interest rates rising
US Equity markets closed the week lower, under threat from US Bond Yields, despite strong corporate earnings. US 10 Year Bond Yields are once again on the rise, with the Fed recognising the inflationary/growth pressures and signalling further rate rises. The rising interest rates present an attractive investment opportunity while bolstering the Dollar, which has rallied strongly into the weeks close. The EUR fell below 1.2300, while the GBP tests 1.4000, on the downside.
The rise in the reserve has bludgeoned commodity currencies, which have been rallying strongly of late. The rising US interest rates have only exaggerated the monetary cycle differences between Australia, New Zealand, Japan, EU and the USA. Inflation remains benign in these challenged economic zones, around 1%, reflecting weak economic growth and prospects. This has hit the previously high flying currencies hard, with the AUD falling to 0.7650, while the NZD tests the downside of 0.7200.
The new week will see further influence on equities and currencies, from economic data releases, unless there is a major Geo-Political event. Global Trade and North Korea appear to be the most likely risks. Global growth will come under the microscope, with GDP and CPI numbers released around the world. The US remains the stellar performer on the global stage, and there is no reason to believe this narrative will change.
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