Collinson FX: March 20, 2019 - RBA reveals threats to Oz economy

by Collinson FX 20 Mar 2019 02:30 PDT 18 March 2019

Collinson FX: March 20, 2019 - RBA reveals threats to Oz economy

European markets continued to be plagued by the impasse of Brexit. The EU is now warning the UK to come up with an alternative plan, that is acceptable to the UK Parliament and to the EU. The Europeans ‘have had enough’ of this stalemate, as have the British people, so the anti-Brexit Parliament must now consider the demands of their constituency. The British Speaker of the House rejected further presentations of PM May’s deal, which has been rejected by massive margins twice, throwing further turmoil and chaos in to the brew. UK Employment continued to improve, with the headline rate falling below 4%, while earnings rose. The GBP traded 1.3250, amidst the chaos, while the EUR pushed up to 1.1350.

US markets are heavily focused on the FOMC meeting beginning tonight. The expectations are for a dovish stance, leaving rates unchanged, while Bond Yields continue to drift lower. The Dollar was soft, with the AUD trading just below 0.7100, while the NZD pushed up to 0.6850. The RBA minutes revealed threats to the Australian economy thus ensuring a dovish, balanced monetary policy. The RBA took note of sliding House Prices (further exemplified in the latest data) which is hurting consumer spending, while the Labour market remains strong. US/China trade negotiations continue, but there has been no signing ceremony scheduled, allowing doubts to creep in to market sentiment.

Lion New Zealand reverses into her berth - Viaduct Harbour - March 11, 2019 - photo © Richard Gladwell

Collinson FX: March 19, 2019 - NZD in bounce and drift mode

Brexit again dominated the news cycle in Europe, as the British Speaker of the House forbid the PM’s presentation of her Brexit agreement, for a third time. He said that there would need to be substantive changes to the agreement for it to be presented again. This did not assist the GBP, which fell back to 1.3230, while the EUR traded 1.1320. The chaos and pandemonium continues, but at least we may see a new chapter written, instead of ‘groundhog day’.

In the US, markets are looking to the FOMC meeting for direction, operating on speculation until the decision. The Fed Chairman is likely to confirm his abandonment of the ‘QT’ program he had been enthusiastically embracing. The damage done to markets and the political pressure was unsustainable. US/China trade talks continue, but the first deadline has been missed, while the April summit looks set to be delayed further.

The AUD regained 0.7100 in domestic trade yesterday, but retreated below again overnight, while the NZD also bounced and drifted to 0.6840. The RBA Minutes will give an insight in to the Central Bank’s perceptions of the current state of the Australian economy and the wider global environment.

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