Collinson FX market Commentary: March 1, 2014 Click here to find out how to get CollinsonFX's free iPhone app
Equity markets continued to rally with Yellen beginning to show her true colours. She is a dove and is looking for an excuse to continue QE Infinity. Federal Balance Sheet expansion is a new theory of the left, with a belief that printing money and monitisation of debt, will have little impact on the economy.
Hyper inflation is not a threat and the more money printed the wealthier we all become. Unfortunately 'lala land' is not a reality and the expansion of the money supply necessarily reduces the value of that currency as measured by corresponding currencies (despite their own inherent weakness) and more importantly asset prices.
Commodities will continue to rise driving costs higher and inflationary pressures. Central Bank measurement of inflation disguises much of the inflation by not including important component drivers. This is a disaster waiting to happen, but short term pushes equities to record levels as the capital must go somewhere with areturn. The Dollar has been sacked, with the EUR rising to 1.3815 and the GBP back to 1.6760, despite benign economic conditions within the single market.
The 'rock star economy' continues to flourish, because of hard economic decisions made post GFC and is reflected in the currency, with the NZD rising towards 0.8400. The bad news is that the economy is trade dependent and the risng KIWI will impact exports and weaker international demand will impact. The AUD remains wounded with a series of disastrous news from major trade exposed industries.
The AUD has consolidated well below 0.9000 and needs a major reversal in domestic economic fotunes to turn the tide. The coming week wil be dominated by Central Bank activity and economic growth data. Collinson FX market Commentary: February 28, 2014
The recent revolution in the Ukraine has not been welcomed by Russia with Putin now focusing on a 'Greater Russia'.
Federal Reserve President, Yellen, reflected on QE Infinity and openly advocated a halt to tapering if the economy continues to weaken. Equities jumped and the Dollar was slammed. Recent gains were wiped out, with the EUR rising back to 1.3710 and the GBP towards 1.6700.
Durable Goods Orders fell 1% and Weekly Jobless Claims climbed as economic data confirmed a slowing economy. The weather has been an excuse, but a continuation will worry the Fed and allow a resumption of QE Infinity. Geo-Political issues also grabbed the headlines with the Ukraine the current center of attention.
The Olympic completion has allowed a return to business and Putin will not relinquish the Ukraine without a fight. He is currently building up military forces on the Russo-Ukraine Eastern border and will likely also use economic carrot/sticks. A predominantly Russian population in the Semi-Autonomous, Crimea, have risen up to the 'Fascist Revolutionaries' which may provide Putin with an excuse for action.
The KIWI continued to book recent gains, rising to 0.8350, after continued improvement in Trade data and support from a weakening reserve. The AUD failed to book gains, despite a tanking USD, as more bad news engulfed the country. The national carrier, Qantas, announced a massive loss and emergency measures to fight the crises.
This is another domino to fall in recent times, with closures in Aluminium Smelters and the entire car industry. This explains the poor performance of the AUD, which has slipped well below 0.9000, with investors finding more attractive currencies and investments. Collinson FX market Commentary: February 27, 2014
US New Home Sales jumped to a 5 year high, increasing 9.6%, and reversing recent trends. The improved data was enough to spur equities higher and boost the Dollar. A reversal in economic conditions may have tempted Fed President, Yellen, to stall tapering and this may have removed the temptation.
The Dollar rallied strongly, with the EUR falling to 1.3670 and the GBP back to 1.6640. German Consumer Confidence improved to 8.5, from 8.3, and GDP growth in the UK hit 2.7%. European conditions are slowly improving but this will not assist the currency as the Dollar books gains without QE Infinity.
The rise in the reserve currency pushed associated currencies lower, with the AUD dropping below 0.8950 and the KIWI below 0.8300.
The release of NZ Trade Data today will be watched closely and is expected to support the 'rock star economy' status although the currency direction continues to be driven by macro-economic conditions. Collinson FX market Commentary: February 25, 2014
The week began on a positive note, with lots of platitudes from the G20, promising Global growth and a recovery for all!
Markets have ignored the recent string of weak economic data, excused by the extreme winter weather conditions in the US, and taken heart from Yellen's promising continued tapering.
'Beware the Wolf in Sheep's clothing!' The EUR slipped back to 1.3725, after benign CPI data, confirming little in the way of measured inflation. The GBP is trading around 1.6600 and remains susceptible to reserve currency moves. Confidence continues to drive commodities higher and the associated currencies.
The AUD is attempting to mount 0.9000 again and the KIWI has breached 0.8300, with local Credit Card spending continuing to rise, supporting growing consumer confidence in the 'rock star' economy. Direction will continue to come from US data and Central Bank commentary. For more on Collinson FX and market information see:
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