Collinson FX: May 6, 2019 - Rate cut for Kiwis?

by Collinson FX 6 May 2019 20:11 NZST 28 April 2019

Collinson FX: May 6, 2019 - Rate cut by RBNZ?

US Non Farm Payrolls again blew through expectations, while Unemployment fell to 3.6%, the lowest Unemployment level since 1969! The strong labour market reversed recent losses in equity markets and boosted confidence. EU CPI data beat expectations, coming in at 1.7% p.a., showing signs of growth but only in the socialist paradigm.

EUR pushed back towards 1.1200, while the Yen traded 111.00, as the Fed remains non-interventionist.

UK Local elections were a complete disaster for both the Tory Government and the Labour opposition, with both being decimated by the electorate. This is a sad reflection of the peoples complete loss of faith in their elected leaders and their failure to implement Brexit. The extension of Brexit negotiations has meant that the UK must now participate in the EU elections and this will be a similar catastrophe, with the Brexit party expected to perform well. The GBP jumped back to 1.3150, with hopes that the message sent by the electorate, may be heeded by the ruling Parliamentarians?

The coming week has important Central Bank rate decisions from both the RBA and the RBNZ. They are both expected to be dovish, with recent weak growth data, driving expectations of continued generous monetary policy. There is a possibility of a rate cut by the RBNZ, but it is unlikely the RBA will act, with the Federal Election on the doorstep. The AUD tested 0.7000 on the downside, which is a crucial support level and is a central focus for traders. The lack of a trade deal between China and the US has extended nervous sentiment through these commodity markets.

The Australian Federal Election has the possibility of creating the perfect storm in markets, which are sitting on the edge of the precipice, meaning these currencies remain extremely vulnerable.

Silver fleet round the windward mark - Day 6 - 2019 Toyota New Zealand Optimist National Championships, Murrays Bay, April 2019 - photo © Richard Gladwell

Collinson FX: May 3, 2019 - Oil continues to unwind

The Bank of England left rates on hold, in line with the Fed, concerned about growth but relieved by the Brexit extension. The Canadian Bank of England Governor has been politically motivated and massively ‘pro-remain’ in his behaviour and language since the referendum was announced more than 3 years ago. Partisanship is not a quality appreciated in the Bank of England Governor and many in the market will be looking forward to his replacement. The Dollar regained momentum, pushing the GBP back to 1.3020 and the EUR back blow 1.1200. US Durable Goods Orders and Factory Orders both showed healthy gains as the US economy continues to flourish.

Oil prices continued to unwind, with global growth warnings, from both the BofE and the Fed. Global demand for commodities continues to reflect sluggish economic growth and the lack of conclusion to the US/China trade agreement. The AUD is on a the edge of key support levels, slipping below 0.7000, while the NZD heads back towards 0.6600. The tenuous position of these commodity based currencies, is both technical and fundamental and key technical floors are tested, while economic data points to weaker

Silver fleet start - Day 6 - 2019 Toyota New Zealand Optimist National Championships, Murrays Bay, April 2019 - photo © Richard Gladwell

Collinson FX: April 30, 2019 - Markets book gains

Markets quietly booked some early gains in equity markets, still enjoying a strong earnings season. The surprisingly strong US GDP number, for the first quarter, was a boost to global market confidence and commodity prices. This had a direct impact on the associated currencies, which had been under extreme downward pressure, recently. The NZD came back from an oversold position to trade back up to 0.6650, while the AUD rebounded off key technical support levels around 0.7000, to push back up to 0.7050.

Markets await key events in the US, including the FOMC rate decision and Non-Farm Payrolls, out Friday. There is an avalanche of global economic data releases, throughout the coming week, which should drive markets. The Spanish held an election over the weekend, with the incumbent Socialist party leading in the seats taken. Negotiations are under way to form an alliance. The Dollar remained strong after the fantastic growth data, with the EUR trading 1.1180, while the GBP attempts to hold 1.2900.

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