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Collinson FX: April 16 2019 - Markets settle

by Collinson FX 15 Apr 2019 13:33 PDT 16 April 2019

Collinson FX: April 16 2019 - Markets settle

Markets settled after a strong week last week. US Banks lead the way in corporate earnings, although Goldman’s revenue missed expectations, giving the markets some pause at the open. Chinese/US trade talks seem to be progressing well and the Fed has adopted a supportive monetary policy ensuring blue skies for equity markets. The US Dollar was steady, with the EUR holding 1.1200, while the GBP regained 1.3100. The Empire State manufacturing numbers showed further gains to this important engine of growth in the US economy.

Australian markets await the release of the RBA minutes, which will give insight into the state of the local market and how the international markets are impacting. The local market is preoccupied by the Federal election, although the minutes will provide a brief distraction. The AUD is trading around 0.7175, while the NZD holds above 0.6750, awaiting important economic data releases globally.

Collinson FX: April 15 2019 - Chinese exports explode

Markets rallied strongly to close the trading week, boosted by strong corporate earnings from the United States, lead by JP Morgan. The Banks love rising interest rates and they have made hay while the sun shines, despite the Fed moving to a more dovish monetary policy. The rhetoric coming from the Fed, ECB and IMF has been negative, with global growth warnings, but progress on the US/China Trade negotiations has boosted confidence. Chinese exports exploded in their latest data release, more than doubling expectations, which is a very positive sign for global commodity demand. This boosted the commodity currencies, with the AUD jumping to 0.7170, while the NZD pushed up to 0.6770.

European markets have been mired in ‘Brexit’ chaos, but agreed to extend the Brexit date until 31st of October, further kicking the can down the road. The impasse will not be broken until British Parliamentarians agree to implement the will of the people. This will require a change in leadership and personnel. The Tories will need to change the Cabinet and PM, or a general election will be necessary to replace all Members of Parliament. The GBP settled around 1.3070, while the EUR pushed towards 1.1300, with the deadline pressure delayed.

The next two weeks are abbreviated due to the Easter holidays, but welcome a plethora of economic data, lead by GDP and CPI numbers. Global growth and international trade developments will likely dominate markets.

Collinson FX: April 12 2019 - Trick or Treaty?

Progress continues on the trade negotiations between the US and China. Treasury Secretary said there would be no arbitrary deadline, but an enforcement mechanism was now in place and this could lead to the biggest change in the economic relationship between the two countries in forty years! This is all good news for global growth sentiment and the Fed and ECB have both pledged to keep the cheap money flowing. The US CPI number was higher than expected, while Chinese CPI was higher and in line with expectations. The Dollar was bolstered by the news, with the EUR falling back to 1.1250, while the Yen moved to 111.60.

Brexit was extended to Halloween Day, which should enable plenty of colourful analogies, but just extends the time scale of this ‘slow motion train crash’. Commodity currencies gain some sustenance from the US/China trade negotiations but the rising reserve had it’s impact on the associated currencies. The AUD fell back to 0.7120, while the NZD drifted to 0.6720, awaiting NZ data including Migration, Manufacturing PMI and Credit Card spending. Local economic data has limited impact on the currency unless it is radically beyond expectations. The global trade environment is far more significant.

he AUD had been on a tear, moving up to 0.7150, but the negative trade news from Europe and the US, has pushed the Dollar higher. The AUD has since retreated to 0.7120, while the NZD fell back to 0.6730, after previously breaking above 0.6750. Trade is the global macro story dominating world markets.

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