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Collinson FX: December 13, 2018 - Markets rebound

by Collinson FX 13 Dec 2018 16:15 PST 28 November 2018

Collinson FX: December 13, 2018 - Markets rebound

Markets rebounded strongly overnight, as confidence over US/China trade talks progress well. Trump has effectively said ‘watch this space’, while speculation that the Chinese will reduce tariffs on US motor vehicles rose, on a legislative level. Trump also hinted he may get involved in the Huawei crises, after the arrest of the CFO in Canada, followed by her release on bail. Market confidence flooded back with the trade news, while US CPI data was softer, but in line with expectations.

The EUR was steady, trading 1.1350, preceding of the final ECB meeting of the year. The ECB is expected to end QE, confirming stronger economic performance and despite all the political turmoil. The GBP surged back, to trade 1.2650, as British PM looks likely to survive a no confidence vote. The Brexit crises rolls on, ahead of the ECB meeting and an the EU leaders meeting. The slow motion train wreck continues, across the UK and Europe, but politicians may unfathomably allow her another chance? It is mystifying considering her abject failure over the Brexit agreement.

Commodity currencies should benefit positive trade sentiment, considering their dependence on trade, but speculation needs to turn to resolution. The AUD moved up to 0.7220, while the NZD drifted to 0.6850, holding the line. Trade is the dominant factor in global trade, although the European crises of Brexit and the spreading ‘Yellow Vest’ revolution, continue to destabilise.

Collinson FX: December 12, 2018 - NZD nudges .70c

Markets were calm overnight, despite the political turmoil surrounding Europe, allowing equities a breather. Trump tweeted that the China-US were going well and an announcement was coming. The Chinese may be set to announce a cut to tariffs on US cars, from 40% to 15%, which is a positive sign. The Chinese deal needs to be done to restore confidence in global economic growth. The EUR stabilised at 1.1300, while the Yen traded to 113.40, reflecting temporary hiatus.

The U.K. continues spiral out of control, as Brexit effectively controls the political narrative, leaving the UK in a state of flux. PM May suspended the vote for her Brexit deal, as it was expected to fail miserably, allowing her to attempt to renegotiate with the EU. The GBP collapsed to 18 month lows, as the Government lurch from one failure to the next, which may lead to the dumping of May. Failure of Brexit will have a huge fallout across Europe. France has their own problems that they should be focused on.

The commodity currencies are travelling well, considering the global upheaval, with the AUD regaining 0.7200 and the NZD pushing up to 0.6975. These trade dependent currencies have remained remarkably stable, considering the trade war raging between the US and China. Let’s hope China can came to the table.

Collinson FX: December 11, 2018 - US/China trade deal optimism

UK PM May delayed the Brexit vote in the House of Commons indefinitely. The GBP collapsed through key technical support levels, while equity markets in the US and Europe continue to unwind. The GBP crashed, to trade 1.2515, with the Government in a state of total confusion. Economic data is beginning to support the sentiment, with Industrial/Manufacturing Production contracting, while trade numbers unwind. It is chaos and turmoil.

US markets were spiralling out of control, following the ‘No Deal’ trade agreement at the G20, sending markets into turmoil. The threat to global growth is the driver of these equity markets collapsing. The arrest of the CFO of Huawei in Canada, on US charges related to sanction busting with respect to Iran, has raised the temperature. The political disarray was not confined to the UK, as the ‘Yellow Vests’ in France are spreading across other EU nations. What started as a protest against green energy taxes has morphed into an anti-Government revolution. The EUR traded 1.1350, looking extremely vulnerable, while the yen trade 112.90.

The trade exposed countries should be the most impacted by the spiralling trade wars, as the AUD melts down to 0.7180, while the NZD remained resilient at 0.6860. The KIWI has been a haven in disrupted times, but cannot swim against the tide for long? US officials remain confident of a trade deal with China but the Chinese are very tough negotiators?

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