Collinson FX: November 28, 2018 - Brexit has Europe in turmoil
by Collinson FX 28 Nov 2018 22:06 AEDT
28 November 2018
Collinson FX: November 28, 2018 -
Risk-on sentiment continued to prevail across global markets as we approach the all important G20 meeting. Trump has thrown cold water on the prospects of a China/US trade agreement. He has stated that it is highly unlikely additional tariffs will not be levied on China, dampening the speculation regarding a deal to be agreed at this week-ends G20 meeting in Argentina. If a deal is not reached then markets will reflect the damage being done to global trade, through equities and currencies.
Europe remains in turmoil, after the E27 agreed to a Brexit deal, which is unlikely to be accepted by the UK Parliament. This deal is said to be the worst deal possible for the UK!
The GBP continues to suffer, falling to 1.2740, with disruption set to continue. In addition to the Brexit crises, the EU has the Italian Budget crises, which threatens stability. The EUR fell below 1.1300, suffering the storm, with more to come.
Trade exposed countries, such as Australia and NZ, are under pressure and are likely to benefit more than most from a US/China Trade deal. The NZD slipped back to 0.6770, while the AUD tests 0.7200, on the downside. The direction of these commodity dependent currencies are dependent on the G20 and the trade deal.
Collinson FX: November 26, 2018 - Oil in freefall
Markets in the US were closed for the Thanksgiving Holiday and that extended in to ‘Black Friday’ Holiday shopping season. US equity markets have been suffering a meltdown, last week, but this was cauterised by the Holidays! Oil continued to haemorrhage into ‘bear market’ territory, which has not helped energy company shares, but will be a stimulant to global markets. The OPEC and Non-OPEC members meet in Vienna on December 6th and may curtail supply, to combat the freefall in Oil Prices.
The EU meet this Sunday to officially sign off the ‘Brexit’ deal with the UK. This deal may lend some support for the EUR and GBP, but the hostage agreement is appeasement and is likely to be rejected by the British Parliament. This should ensure ‘Brexit’ remains a destabilising issue for both the GBP (1.2800) and the EUR (1.1325). The Italian Government has signalled a willingness to negotiate with the EU, to avoid retaliatory punishments, although this remains a clear and present danger.
China and the US are busy working on the US/China Trade agreement, with a goal the G20 in Argentina, which will me a defining moment for markets. The NZD Dollar slipped to 0.6770, reflecting the rising reserve, while the AUD held 0.7200. These trade exposed, commodity currencies, are thoroughly reliant on the outcome of the Trade negotiations.
The week also holds release of economic data including inflation and growth, in Europe and the US, while the Fed minutes will give insight in to the expected December rate rise from the Feds.
Collinson FX: November 23, 2018 - China/US doubts hit KIWI
The US market was closed for the Thanksgiving holiday, allowing calm to prevail globally, after some negative sentiment in equities. The markets will remain quiet until the new week, as many take the long weekend in the USA. The focus thus shifted to Europe and all the problems they are experiencing.
A new Political Declaration over Brexit was leaked, which was somewhat more flexible, than the agreement PM May took to the British Parliament. This is due to be signed over the weekend, so we could be in for an eventful start to the week, on markets. The GBP regained some ground on the news, jumping up to 1.2880, while the EUR traded around 1.1400. Europe has other serious worries, in the form of the Italian budget crises, which has the ability to threaten the financial sustainability of the EU!
China/US trade rhetoric has been surprisingly positive, ahead of the G20 meeting, although doubts over an agreement are rising. This did little to encourage the boisterous NZD, which fell back to 0.6800, while the AUD pushed above 0.7250. Australian PMI data may influence local markets in domestic trade today, but global markets will remain calm, due to the US holiday. The caveat, as always, is an unexpected Geo-Political event.
Collinson FX: November 21, 2018 - More losses in US
US share markets continued to haemorrhage overnight, with yet another day of losses, starting to look like a correction. October was a bad month for equities, as is often the case in the troubled month of historical significance, but the continuation is a distinct worry. This is a direct fall-out from the ongoing trade war between the US and China and the global growth implications it will have. There is also a reaction to the Mid-Term US elections. The Democratic win in the House has given the people divided Government and this will stall the Trump administration policy agenda.
The Dollar regained some ground, as a safety play, with the EUR slipping back to 1.1350. The GBP continues to fall, trading 1.2780, mired in ‘Brexit’ battles. The EUR will also be heavily impacted by the ‘Brexit’ impasse and will suffer from the continued fall-out from the Italian budget crises.
RBA minutes were bullish, citing a strong labour market and GDP growth, although trade fears remain a threat. It is these fears that are destabilising the rebound rally in these commodity currencies. Strong domestic data has driven a rally in the NZD and AUD but the fears over the destructive US/China trade war will impact. The rebound in the reserve pushed the AUD back to 0.7225, while the NZD fared better, but still drifted to 0.6800.
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