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Collinson FX: December 28, 2018 - Dow jumps 1000 points

by Collinson FX 28 Dec 2018 03:22 PST 29 December 2018

Collinson FX: December 28, 2018 - Dow jumps 1000 points

Markets enjoyed a historic spike in the previous days trade. The Dow jumped nearly 1,000 points! This is the largest single days gain in nearly 10 years. This comes hard on the heals of historic Christmas losses suffered over the holiday season, which follows a correction over the final quarter. The volatility comes from uncertainty in investors minds. The environment has been chaotic, global trade wars, ‘Brexit’ uncertainty and massive debt levels exasperated by the Feds tightening of monetary policy. Trump advised investors to buy into the dips and that is exactly what many did. These gains eliminated some of the Christmas losses, although markets again turned negative overnight.

The Dollar was relatively unscathed, with the EUR trading around 1.1400, while the Yen held around 110.70. The market was upset by talk of a new executive order, banning Chinese products from Huawei and ZTE, which adds negativity to the ongoing US/China trade negotiations. This did not assist the trade exposed commodity currencies, with the AUD testing 0.7000 to the downside, while the NZD slipped below 0.6700. US Consumer Confidence data was weaker, while US House Prices and Jobless numbers were steady. Look out for Japanese data in local markets. Japanese CPI, Industrial Production and Employment numbers have the capacity to influence local markets.

Direction and extreme volatility continues to come from the US markets and this is being driven by equities influenced by trade, monetary policy and political events. This will continue.

Collinson FX: December 27, 2018 - US stocks rebound

The US share markets rebounded strongly for Boxing Day trade after the rout suffered pre-Christmas. Much of the disarray enveloping markets surrounds the Federal reserve. Trump has firmly placed responsibility for the disruption at the door of the Fed. The aggressive policy of interest rate rises was the only source of markets woes and Trump encouraged buying the dips. To add to the confusion, Treasury Secretary Mnuchin, directly contacted major banks and also dismissed rumors Fed Chair Powell may be fired.

The US Government also suffered a partial shut-down, due to a political impasse between Congressional Democrats and President Trump, which added to the confusion. This does not directly impact markets although the political fall-out does disrupt already insecure markets. The Dollar recovered slightly, with the EUR slipping below 1.1400, while the Yen trades 110.70.

Commodity currencies have been relatively static over the holiday period, with the AUD holding 0.7050, while the NZD trades above 0.6700. There are no local economic data releases, to drive domestic markets and light international trade ensures benign conditions.

Collinson FX: December 21, 2018 - Tumultuous week An end to a tumultuous week on the markets, highlighted by the Federal Reserves continued tightening of monetary policy. The rise in interest rates confirms the healthy state of the US economy, but ignores the calls for a more dovish stance on monetary policy, with all the economic challenges flooding markets. Trump has attacked the Fed Chairman and advocated strongly for a more stimulative monetary policy, while rising rates will not address the looming talk of global recession. Trade remains a challenging issue, with no solution in sight, while the UK and Europe remain deadlocked over Brexit. The Dollar rallied, with the EUR slipping below 1.1400, while the Yen moved to 111.20.

Global equities have suffered a rout, triggered by the Federal Reserve, but aggravated by growth prospects and the talk of a global recession. The Chinese have been resistant to a trade deal with the USA, while the US Justice department has charged Chinese nationals with IP theft, aggravating an already testy environment. This has not helped the trade exposed, commodity currencies. The NZD has crashed to 0.6700, while the AUD fell to 0.7050, as economic data has started to reflect the challenging trade environment. NZ GDP numbers missed expectations, while Australian employment ticked higher.

Xmas week will be quiet. The market has missed this years Santa rally and the final quarter has been disastrous for global equities. Recession is now being predicted, as equities enter a bear market, offer gloomy prospects for the New Year. Global trade wars remains key, especially to the trade exposed nations, Australia and NZ.

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