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Collinson FX: January 9, 2019 - Markets regain confidence

by Collinson FX 9 Jan 2019 03:52 PST 10 January 2019

Collinson FX: January 9, 2019 - Markets regain confidence

Markets continued to regain confidence as China/US trade negotiations look to progress in China. The US team are looking to iron out the points of disagreement with the Chinese and ensure a Trade pact is signed by the end of the 90 day negotiating period. March 1 was set as the goal at the G20 and it will more than likely go down to the line. Equity markets reflected the growing confidence surrounding trade, while the Dollar settled. The trade exposed currencies held on to recent bounces, with the AUD trading 0.7125, while the NZD consolidates above 0.6700. These both remain extremely vulnerable to the ebbs and flows surrounding the US/China trade negotiations.

German Industrial Production contracted sharply and fears of a cut in growth prospects loom. The German economy is under pressure and the chaos surrounding ‘Brexit’ continue to threaten Germany and Europe. The UK is a huge market for the Germans and the uncertainty and conflict surrounding Brexit threatens their economic prospects. The EUR trades 1.1440, despite a softer Dollar, which may be subject to further pressures from the credibility of the European Market. The UK remains immersed in the Brexit quandary, although a hard-Brexit may be the answer. The GBP trades 1.2710, off lows, but this is at the bottom of the trading range and remains extremely vulnerable.

Trade rhetoric remain the most important influence on markets although Central bank action is also a major contributor. Local economic data reflects individual national economic conditions and will influence the associated currencies, but major global trade issues have become a defining driver for all.

Collinson FX: January 8, 2019 - Oil to be pushed to $80/barrel

Global markets continued to stabilize with gains in equities across Asia, Europe and the US. Chinese Foreign Ministry officials have spoken of the eagerness of both the US and China to reach a trade agreement. US officials arrived in China to negotiate an agreement. The deadline imposed at the G20 was March 1, which is when the suspended tariffs come in to action, which will probably mean the agreement will not be reached until the deadline. The speculation surrounding the process will cause fluctuations in markets over the next couple of months. Trump has said the Chinese flagging economy provides a massive incentive for a resolution. Oil also recovered $49/barrel, with OPEC officials committing to controls on supply to push the price back to $80 barrels.

The rising sentiment allowed the Dollar to retrace, with the EUR trading 1.1460, while the Yen holds around 108.50. The good news on the trade front allowed for the trade exposed currencies to regain some ground. The AUD pushed back to 0.7140, while the NZD moved back up to 0.6750. These commodity currencies remain exposed to volatility, as speculation surrounding rhetoric leaking from trade negotiations, influence the currencies.

Markets are slowly returning to normal and while risks remain, political stability may become an issue across the globe?

Collinson FX: January 7, 2019 - US back into the Black

US equity markets roared back in to the black to close a shortened holiday week. The Dow posted another massive gain of over 800 points at one stage. The gains were attributed to a spectacular Non Farm Payrolls number and comments from the Federal Reserve Chairman Powell. The headline unemployment rate popped up to 3.9%, but this was due to rising participation rates, which is a strong signal for the labour market. The NFP number was expected to be 184,000, but the number blew through expectations, adding 312,000! This supported a major confidence boost, while Fed Chair Powell outlined a temperate and patient attitude to monetary policy, which further improved sentiment.

The market rallied strongly on employment data and the Feds dovish statement but the Chinese/US trade talks set for next week in Beijing provides blue sky prospects. The positive attitude of both participants has raised hopes and market prospects. This enabled the beleaguered commodity trade exposed currencies. The AUD jumped to 0.7110 to close the week, while the NZD recovered 0.6740, reflecting a very positive close to the first weeks trade for the year. These currencies are heavily dependent on the trade talks, so next week will be very important.

The coming week will be focused on the trade talks in China and economic data will reflect historical numbers. Central Bank flexibility appears to be on the rise, which will assist share markets across the globe. Bond Yields have retreated, allowing relief to overburdened debt holders and capital hungry industry.

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