Collinson FX market Commentary: April 11, 2014 Click here to find out how to get CollinsonFX's free iPhone app
Equity markets tumbled again as Global growth prospects degenerated. China Exports and Imports both contracted sharply sparking fears of a slowdown in the recovery. Demand slipped for commodities after ealier good news from Employment numbers released in Australia.
The Unemployment rate fell from 6.1%, to 5.8%, boosting the AUD back to 0.9450. The China data realease caused the AUD to slip back to 0.9420 and the KIWI testing 0.8700. The Bank of England chose to leave interest rates unchanged, although it is strongly tipped to follow the RBNZ as the early Central Banks to begin to raise rates, post GFC. The GBP dropped below 1.6800, although the EUR again tested 1.3900, a reflection of the maligned Dollar as much as any inherent local strength.
The Fed hurried to reassure investors that the extended low interest rate environment would continue, in an effort to stimulate growth, and lay waste to the reserve currency. Nervous equity markets are being trashed as many question the authenticity of the rally and worry the bubble is about to burst?! Collinson FX market Commentary: April 10, 2014
Fed minutes, released overnight, revealed further support for stimulus via monetary policy. Central Bank influence is far from over and further QE will continue as growth stutters and employment lags. All the talk of tapering was nipped in the bud and equity markets surged.
Further expansionary monetary policy gives impetus to a recently flagging stock market with the DOW booking gains of close to 200 points. This continues to undermine the Dollar with the EUR rising to 1.3850 and the GBP testing 1.6800. This should come as no surprise, as Yellen is a renown dove and previous commitment to tapering, was the surprise.
Australian markets moved upwards, with Consumer Confidence rising and the currency benefiting the reserve weakness. The AUD moved up towards 0.9400 while the KIWI consolidated just under 0.8700. Gains are a reflection of the contempt the Fed has for the USD, which is being manipulated lower, to stimulate trade growth.
At some point confidence in the reserve currency will be undermined and this will be red flagged in the bond markets. Collinson FX market Commentary: April 9, 2014
The US Dollar continued to suffer big hits as faith in the recovery of the economy waned. The EUR rallied to 1.3800 and the GBP 1.6750 supported by by some steady GDP growth and Industrial/Manufacturing Production.
Confidence has taken a hit, in the US, after lacklustre Employment data added further questions to the economic recovery. The precarious state of equity markets is more a reflection on the created bubble than the parlous state of economic affairs. The Fed has manufactured an environment, through excessive liquidity, that has allowed the situation to spiral out of control. The bond market will be the indicator that warns investors to the extent of over valuation.
Commodities reflect the weak reserve and asscoiated currencies posted further gains. The AUD hit 0.9350 and the KIWI 0.8660, reflecting steady domestic economic fundamentals, as much as a heavily impacted Dollar. Economic data will continue to drive markets, absence Geo-Political developments, undermining confidence and the USD. Collinson FX market Commentary: April 8, 2014
Equity markets were sounding the alarm bells, as they crashed again, threatening all the year's gains. The NASDAQ lead the charge lower, this contradicts market bulls, who have promoting the growing recovery across the US economy.
There were no major US economic data releases overnight, so Friday's gloomy sentiment continued. The Dollar will continue to weaken, without any fundamental economic support, with the likelihood of continued dilution of the currency if the Fed stalls tapering.
The EUR rallied back to 1.3740 and the GBP broke back to 1.6600. Japan and Australia have signed a new trade agreement reducing tariffs and promoting trade. This had little immediate impact on the currency although must be good for economic growth prospects in both countries.
The AUD drifted to 0.9260 although NZ House Prices confirmed strong domestic demand pushing the KIWI back to just under 0.8600.
Close attention will be paid to economic data release this week and the impact this has on Monetary Policies. For more on Collinson FX and market information see:
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