Collinson FX: June 27 - US protects IP position
by Collinson FX 27 Jun 2018 18:28 AEST
22 June 2018
Oceanbridge NZL Sailing Regatta, Day 3, February 5, 2018, Murrays Bay SC © Richard Gladwell
Collinson FX: June 27 - US protects position
27 June: Trade wars remain front and centre of global markets overnight, with equity markets stabilising, while the Dollar regained ground. The US are looking to impose new sanctions, to protect IP and technology theft, which was aimed at China but will include all nations. The are reports that the Chinese may not have the stomach for an extended trade war, fighting from a defensive position, with their massive trade surplus threatened. Trump reacted strongly to Harley Davidsons' moves to offshore production to avoid tariffs, threatened a world of tax pain, after providing unprecedented support for the company throughout his Presidency.
The Dollar regained ground, with the EUR slipping back to 1.1650, while the Yen moved to 110.10. The S&P Home Price index was steady, while the Richmond Fed Manufacturing Index jumped strongly, in line with recent strong performances. Commodity currencies also suffered a rising reserve, with the AUD trading below 0.7400, while the NZD fell back to 0.6850. The NZ market awaits Trade data, out this morning, with positive expectations.
Trade wars remains the focus of the weeks market moves, while NZ Central Bank rhetoric is undermining the currency, in the face of a stronger reserve.
Collinson FX: June 26 - Upping the ante
26 June: Escalating 'trade wars' hit global equity markets overnight. The tit-for-tat is now spreading across Europe, China and North America. Europe appears to be the primary target, as pressure mounts on Merkel, meaning the EU 'team leader' is especially vulnerable. Merkel has been given an ultimatum, by her domestic coalition partners, to come up with a solution to the immigration crises. She met with a selected group of EU leaders and they failed to find a solution and she has resorted to negotiations with individual members. This issue could bring down the German leader and signal a change of the old guard elites, that have brought Europe to this point. The pressure on Europe is immense and the Trump administration has used this opportunity to open a trade war. The Art of the Deal!
Turkeys President Erdogan was re-elected and reinforces his position, which provides stability, but drags the nation towards the dreaded Islamic theocracy. The UK has been hit by a series of corporate threats, with Airbus and BMW indicating closures, in a post-Brexit Britain. This puts further pressure on the British but these global corporates need to be careful. This could damage their brand and market and there are opponents who will gladly step in to the void. The EUR regained 1.1700, despite the turmoil, while the GBP settled around 1.3280.
The trade exposed countries remain extremely vulnerable to the escalating global trade wars, although the softer reserve allowed the commodity currencies to settle. The AUD teeters around 0.7400, while the NZD slipped back below 0.6900, as local NZ market looks to the Central Bank for direction.
Blooming global trade wars remain the greatest destabilising threat to markets.
Collinson FX: June 24 - Oil production increase
24 June: OPEC+, is the new expanded OPEC, including Russia and other major non-OPEC oil producers. This new, expansion organisation, has agreed to increase oil production. Meeting in Vienna this week, after pressure from the Trump administration, they have ignored Iran and agreed to increase supply. This allowed for a relief rally in equities, after a volatile week, dominated by expanding global trade wars. The trade negotiations are going on behind the scenes and the tit-for-tat rhetoric is a critical part of these negotiations. The EU have responded to the US Steel and Aluminium tariffs, with politically targeted selective tariffs, inviting a 20% tariff to be levied on EU car exports to the US. These 'trade wars' are disruptive to global markets, especially upsetting trade exposed nations, but will be resolved.
The Bank of England left rates unchanged, but some members were more hawkish in their views, increasing the chance of an interest rate rise in the near future. The 'Brexit' disruptions are likely to continue, but the eventual extraction will see confidence flood the UK markets and the currency. Markets will look at the RBNZ OCR in the coming week, although no changes are expected, but attention will be paid to the Governor's rhetoric. The NZD has suffered the trade disruptions, as has the AUD and both remain vulnerable. The NZD closed the week trading around 0.6900, while the AUD holds 0.7440.
Expect more disruptions, in the coming week, from trade negotiations. The EU summit is likely to be a major Geo-Political event and likely to be dominated by the immigration issue and the associated complications. This could be the beginning of the end for Merkel and the European old guard.
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