Collinson FX market Commentary: August 2, 2014 Click here to find out how to get CollinsonFX's free iPhone app
Equities continued to rally towards new record levels in the US with high expectations of Central Bank support from a dovish Fed. Central Bankers met in Jackson Hole, with Yellen and Draghi expected to reinforce an extended period of low interest rates to support employment while inflation remains benign.
Geo-Political issues appear to be within boundaries and economic data is slowly improving in the USA. EU PMI data was weak, as expected, with the single market on life support from the ECB desperate to overwhelm fundamentals with more liquidity. The EUR traded 1.3280 but further Central Bank intervention will do little to support the currency.
The GBP also felt the effects, falling below 1.6600, after soft Retail Sales. Existing Housing in the US rose 2.4%, in line with recent data, while the Leading Index also found legs with the Philly Fed survey revealing improved manufacturing.
The AUD trades around the 0.9300, after dipping during domestic trade, a direct result of disappointing Chinese Manufacturing data. The KIWI fights back towards 0.8400, supported by attractive interest rates, despite the deteriorating economy due to RBNZ monetary policy. NZ Consumer Confidence contracted and Credit Card spending fell, in line with recent economic trends, mystifying Wheeler. Collinson FX market Commentary: August 21, 2014
The release of the Fed minutes overnight hit equities and currencies overnight. Equities balked at record levels, as the Fed looks for an exit strategy to QE Infinity 'sooner than currently anticipated', while the Dollar found heart. The end of QE could signal a bull-run in the mighty Dollar after an extended assault by the Fed.
The EUR crashed below 1.3300 while the GBP looks to test 1.6600 on the downside. Yellen and Draghi both address Jackson Hole this week which may provide more detail to Central Bank strategies. The rise in the reserve, finally pushed the AUD below 0.9300 and domestic markets will look at Consumer Confidence numbers today, without much enthusiasm.
The KIWI continued to reflect recent weak economic data and added pressure from the Dollar has pushed the NZD back to 0.8375. Central Bank activity remains the overarching driver of market direction with shocks from the Geo-Political crises evolving globally. Collinson FX market Commentary: August 20, 2014
The Bull market appears to have returned to US equities, which is now eliminating the correction that occurred earlier in the year. Expectations were for a 10% correction which is considered healthy and a pre-requisite for a continued Bull-market, but fell well short. This did not occur because of Central Bank expansionary monetary policies.
Corporate earnings have been relatively strong, but economic news has been weak, thus allowing monetary policy to expand beyond previous conceptions. The avalanche of money has been a free kick to bankers and forced investors into equities with little to attract in the bond market. US Housing Starts surged by 15.7% and Building Permits rose 8.1%, in what has been a volatile Housing sector and generally disappointing. This gave impetus to the US markets and pushed the Dollar north.
The EUR is now testing 1.3300 on the downside while the GBP was hammered back to the low 1.67's. RBA Minutes released yesterday confirmed uncertainty globally and domestically, thus allowing the Bank to leave rates low and unchanged for an extended period. The AUD consolidated around 0.9300 although the NZD took a hit after economic data confirmed a contraction in the local economy. GDP growth forecasts were back to 3.8% from 4.0%, although the fiscal surplus remained intact.
The NZD fell to the low .8400’s and is suffering the direct impact of the RBNZ higher interest rate strategy. Interest rate differentials will continue to counter economic fundamentals contradicting Wheeler and his efforts to combat the Housing bubble. Collinson FX market Commentary: August 19, 2014
US Equity markets surged, after gains the previous week, reflected growing confidence in the global Geo-Political situation. Russian-Ukrainian talks began over the weekend, in a search for a solution, while aid convoys still wait. The ceasefire in Gaza is holding and this makes for a relatively quiet period thus boosting market confidence.
The shock of a contraction in German growth has led to expectations that the ECB will further boost stimulus thus supporting equities but not assisting the maligned single currency. The EUR dipped to 1.3350, while the GBP rallied to 1.6730, reflecting currency independence. Jackson Hole commences this week, in Wyoming, in a gathering of Bankers which has led to Central Bank policy changes in the past. It is worth monitoring with important appearances from ECB President Draghi and Fed Chairman Yellen.
House Prices in the US rallied, contradicting recent data, further adding momentum to markets. The AUD consolidated above 0.9300, with interest focused around the release of the RBA minutes that may reveal some insight into the Central Bank strategy. The KIWI is trading around 0.8470 and has an inflation report from the RBNZ to consume, which may influence monetary policy, ergo the NZD. For more on Collinson FX and market information see:
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