Collinson FX market Commentary: August 1, 2014 Click here to find out how to get CollinsonFX's free iPhone app
'Bad news has been good news' for equities because the markets were so utterly distorted by the Fed and other collaborative Central Banks. The Massive expansion of Monetary Policy, in the name of economic stimulus to correct the economic crises, may be coming to an end and this has triggered the latest sell-off in equities. Has the bubble burst? Perhaps although the Fed continues QE Infinity and their balance sheet is beyond all records.
'One swallow does not a summer make'! The 4% second quarter GDP number was a welcome rebound from the first quarter contraction but confirmation of the recovery must come in the form of supportive economic data. The DOW crashed overnight and was reflected in the European bourse. The Dollar remained steady with the EUR 1.3390 and the GBP 1.6885. Commodities were hit overnight and associated currencies suffered accordingly.
The AUD is now testing 0.9300 on the downside, while the KIWI is attempting to hold 0.8500. Non-Farm Payrolls tonight will control the equity markets as a solid number will further spook markets dependent on the Fed's sugar! Collinson FX market Commentary: July 31, 2014
Markets were mixed again overnight with the Fed mulling over interest rates. They cut QE by a further $10 Billion and should complete this process in the next couple of months. The GDP number in the US rebounded strongly by 4%. This was after a contraction of 2.1% in the first quarter but is significant in the recovery and was better than expected.
The next question facing the Fed is when to actually raise rates with inflation on the rise and unemployment falling faster than anticipated. The Dollars resurgence continued with the EUR falling below 1.3400 and the GBP slipping to 1.6915. The crises in the Middle East and Ukraine does not help confidence and may also lend some support to the reserve.
The pressure impacted the commodity currencies with the AUD dropping to 0.9330 and the NZD sitting just above 0.8500.
Look for US employment data to influence the markets to close the week and any further escalations on the Geo-Political front. Collinson FX market Commentary: July 30, 2014
Equities and currencies were relatively unchanged overnight with the FOMC meeting beginning and expectations were for further cuts to QE Infinity. Language will center on continued extra-ordinarily low interest rates encouraging employment and growth etc etc.....!
The EU has decided to impose further economic sanctions on Russia although the extent of these must be questioned when the French have decided to fulfil agreements to sell gunships to the sanctioned. Russia looks to extend their influence over their Ukrainian brothers to prevent the move towards the EC. The Ukrainians are fighting a war to join the EC while most in the west are looking to leave.
The EUR dropped to 1.3410 and the GBP 1.6940 after the recent rally in the reserve currency. US Consumer Confidence jumped while Home Prices were subdued. The AUD traded around 0.9400 after local new home sales rose 1.2%.
The KIWI drifted lower to 0.8510, the victim of the RBNZ war on the economic recovery, but will recover when the carry trade takes advantage of interest rate differentials. Collinson FX market Commentary: July 29, 2014
Markets had little to rally, with all the global turmoil, although US markets took some confidence from the 'earnings season'. The Dallas Fed Manufacturing Activity reported an improvement in manufacturing although the Market Composite PMI slipped lower.
Pending Home Sales contracted a further 1.1% and is now 4.5% lower for the year. Currencies are steady with the EUR 1.3435 and the GBP 1.6980. The FOMC meeting this week will give insight into the Central Bank intentions which have been the real reason for the equity bubble.
The AUD remains strong, trading around 0.9400, while the KIWI is weaker due to the RBNZ 'jawboning' and deteriorating economic data. The NZD trades 0.8540 but will remain a target for the carry trade with attractive interest rate differentials. For more on Collinson FX and market information see:
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