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Collinson FX: May 27, 2019 - Trump calls early end to trade war

by Collinson FX 26 May 2019 16:17 PDT 28 April 2019

Collinson FX: May 27, 2019 - Trump calls early end to trade war

UK PM May has finally resigned (officially leaving June 7), after completely failing to deliver Brexit, as promised on numerous occasions. She will be remembered as perhaps the worst conservative leader in a generation and leaves the party and country, in turmoil. The GBP is trading 1.2700, much lower than the economic performance dictates and this can be solely attributable to the Brexit chaos over three years. The new Tory leader may deliver Brexit and the GBP could literally roar back. The EU will now have to become a lot more flexible, as their intransigence was partly to blame for the disaster, so their leaders will be in a state of concern. The EUR trades 1.1120 and will be impacted by a new deal.

US/China trade fears receded, with Trump indicating the trade war ‘could be over quickly’, which may include Huawei and the electronic supply chain. This allowed a sigh of relief on markets, which rebounded, after a negative week. The fear is that an extended trade war will impact global growth and disrupt the current supply chain. US Durable Goods Orders contracted 2.1% and softening global economic data is a symptom of the disruption. This coming weekend is a Memorial Day long weekend in the US, so markets will be quiet until the US market reopens on Tuesday. Commodity currencies showed some signs of life to close the week, with the AUD jumping to 0.6920, while the NZD spiked to 0.6550. NZ Business Confidence data, out Wednesday the 29th of May, will be a key driver in the local market, although US/China trade developments will remain the macro influence.

Collinson FX: May 23, 2019 - "Dead woman walking"

The Fed minutes were released overnight and they endorsed the ‘patient’ policy currently employed. Fed members were in no mood to change rates, either way; with global threats softening. Previously cited threats from Brexit, Global Growth and US/China trade wars remain, but appear to impose no significantly increased problem. The US/China trade war remains a problem and the rhetoric from both sides seems to be becoming more dogmatic, although the deadline is now the G20 meeting at the end of June. The Dollar remains firm, with the EUR trading 1.1150, while the Yen moved to 110.20. UK PM May is a ‘dead woman walking’ and looks set to go, after this weeks EU elections. The election will be another disaster for the ruling Tories and will force the Conservatives to finally rid themselves of this most incompetent of leaders.

The Australian Government has returned to work, after the most unlikely electoral victory, the currency trades around pre-election lows. The AUD sits around 0.6880, testing technical lows, while the NZD looks to break below 0.6500. These commodity and trade exposed currencies remain vulnerable to the ongoing US/China trade wars and technicals point to further downside. Markets will focus on EU elections and any rhetorical developments surrounding US/China trade.

Collinson FX: May 22, 2019 - Chinese autocracy increases

Markets regained some ground overnight, with the US allowing Huawei to have an intermediary license for software for the phone networks, thus limiting the restrictions imposed. This is all part of the pressure being levied on the Chinese to agree to a deal. Chinese President Xi has decided to play hard ball, launching a new ‘long march’, fighting back and resisting Trump and the new trade compromise. The last ‘long march’ ended in the death of millions of Chinese and the destruction of civilised society by communism. The Chinese are becoming increasingly autocratic and the regime is showing all the signs of totalitarianism. The existing supply chain is under threat and the US will explore new suppliers, which threatens the Chinese suppliers, including the commodity countries including Australia and NZ.

The AUD has fallen back to the pre-election level, following a ‘dead cat bounce’, trading 0.6880. The threats to the Australian currency remains and the trade war between China and the USA has resulted in the ensuing soft economic performance. The NZD operated in the same environment, receiving some support post the Australian election, but now testing 0.6500 on the downside. Markets will continue to follow softening economic data, but remain pre-occupied with global trade wars and the resulting fallout. The EUR holds steady around 1.1150, while the GBP slumped to 1.2720, still mired in Brexit chaos approaching the upcoming EU elections.

Collinson FX: May 21, 2019 - Dead Aussie cat bounces

Australian equity markets rallied strongly on the Federal Election result. The Liberal/National Government is seen as a ‘safe pair of hands’ and will preserve the status quo. The currency managed a bounce up to 0.6930, but it was a ‘dead cat bounce’, falling back to 0.6900 overnight. The good political news is being overwhelmed by recent softer economic growth and employment numbers and the likelihood of a rate cut by the RBA at the next meeting. The NZD received some momentum reversal after the Australian election, but resumed the downward slide overnight, falling to 0.6525.

US and European equity markets lost some ground in overnight trade, after the news that Huawei will lose their google android phone software. The move from google comes after pressure from the Trump administration, requiring licences to deal with some Chinese companies, increasing pressure on the Chinese to do the trade deal. The Dollar continues to rally, with the EUR falling back to 1.1150, while the Yen trades below 110.00. The GBP continues to drop, as Brexit chaos abounds, now under extreme pressure from the Brexit Party. In the coming EU elections, which will cost PM May her job and perhaps offer a last chance to the Tories to exit the EU, the whole EU could suffer upheaval?

Collinson FX: May 21, 2019 - Aussie election stunner

A huge weekend and yet another stunning upset election result. All the pundits and bookies were calling a comfortable Labor victory in Australia’s Federal Election, held on Saturday just gone. The Liberal/National Coalition shocked most insiders and claimed an outsider victory. All the Polls and Bookies were wrong and was reminiscent of Brexit and the Trump Presidential elections. The lead up to the election had seen a steady decline in the AUD, down below 0.6870 on the close Friday, but the surprise result may see a spike in the currency come Monday morning. The result will be a boon for the Australian economy, with the conservative and predictable approach of the Coalition allowing the status quo, rather than the heavy tax and spend, socialist policies of the Labor favorites.

The Trump Administration confirmed that EU auto tariffs would be delayed for six months, relieving some pressure in the Global trade wars, allowing the US to concentrate on China. University of Michigan Sentiment surged to a five year high, confirming the strong performance of the US economy, despite the threat to global growth by the US/China trade wars. The cross party Brexit talks collapsed overnight and the GBP plunged to recent lows, trading 1.2730, while the EUR drifted back to 1.1150.

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