Collinson FX: August 29, 2018: Record highs in US
by Collinson FX 28 Aug 2018 17:22 PDT
29 August 2018
Black Jack heads for the turning mark at Baynham Island in a rain squall - Hamilton Island Race Week - Day 6 © Richard Gladwell
Collinson FX: August 29, 2018 - Record highs in US
US Equity markets continued to beat record highs, buoyed by global trade deals, improving market sentiment and confidence. The new deal between the US and Mexico has now enabled markets to look past the biggest threat to global economic performance. The biggest single threat, cited by economists and Central Bankers, has been the threat of global trade wars. Europe and Mexico have now come to the party, confirming agreements for fair, free and reciprocal trade. It will not be long before the Canadians and Chinese cave. Their negotiating positions are weak and the pressure is massive.
US consumer confidence hit the highest level since 2000! The Richmond Fed Manufacturing Activity also came in strongly, while the S&P Case Shiller Home Price Index remained positive. All the good economic news has not been missed by markets. The Fed is feeling the pressure from the Administration and allowing monetary policy to settle, releasing pressure on interest rates and the Big Dollar. The EUR regained 1.1700, while the GBP attempts to regain 1.2900, mired in Brexit speculation.
The NZD was a beneficiary of the softer reserve, regaining 0.6700, while the AUD trades around 0.7350. The Australian dollar has suffered the political turmoil of the previous week and looks to regain some momentum, as the dust settles and the new regime establishes its bona fides.
Collinson FX: August 28, 2018 - US kisses and makes up with Mexico
US and Mexico signed a historic new trade agreement, leaving behind NAFTA and Canada, solving yet another major problem in the global trade war. This follows the agreement with the EU and pours massive pressure on China and Canada. This is a huge boost for Trump and the USA. The Dollar continued to drift lower, following the fallout from Jackson Hole, which allowed the Dollar some leeway. Fed Chair Powell made a dovish monetary policy speech, which continued to back interest rate rises, recognising that there were no signs of ‘inflation accelerating’.
The EUR rallied towards 1.1700, while the GBP approached 1.2900, feeding off the weaker Dollar. The PBOC supported the Yuan with some new regulation, which is a step in the right direction, from the perspective of currency wars. The AUD settled around 0.7340, after a massive week of political disruption, hoping a new leadership will calm the political storm. The NZD approaches 0.6700, supported by a softening reserve, rather than local economic data.
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