Collinson FX market Commentary: May 10, 2014 Click here to find out how to get CollinsonFX's free iPhone app
Equity markets stabilised to close a relatively quiet week.
The EUR continued to drift lower as digestion of ECB's President Draghi's advocation of a lower currency. The single currency fell to 1.3750 and the GBP dropped to 1.6850. The AUD held ground, after Chinese CPI came in lower than expected, 1.8% versus previous 2.4%.
This coming week is a huge one for economic data release. We have a close look at growth, inflation, manufacturing and the consumer. The sheer volume of statistics will drive market direction as US equities are now testing new highs. Putin is lowering his profile as the situation in the Ukraine deteriorates. The Geo-Political developments could be the trigger for nervous markets to 'sell in May'!
Keep an eye out for US housing data as recent signs point to a serious, negative turn around. Collinson FX market Commentary: May 9, 2014
European equity markets rallied and the EURO slipped after ECB President jawboned the currency lower. He also concluded that the Central Bank may ease monetary policy in June. The EUR dropped to 1.3850, in a familiar move, by yet another Central Banker.
US markets opened positive but quickly hit the wall retracing from record equity highs. Nervous traders are on a knifes edge keenly watching Yellen and any economic data. The Geo-Political situation has receded into the background, as Putin intended, but this is an extended game of Chess and easy to see who is in control.
The AUD held onto earlier gains, trading 0.9375, after Unemployment remained steady at 5.8%. Expectations were for a rise and support also came from a rise in Chinese exports. The KIWI remains 0.8650, despite the RBNZ, with the pull of high rates of return too much for the carry trade! Collinson FX market Commentary: May 8, 2014
Yellen testisfied today and reassured markets that interest rates will remain low for the foreseeable future as growth stumbles and Unemployment continues to fall while inflation is no threat. She reinforced the continuation of tapering and expects QE Infinity to be over by the end of the year.
Equities loved the news and continued to rally with the exception of the tech stocks. The Dollar found some stability with the EUR 1.3915 and the GBP 1.6950. The situation in the Ukraine improved after Putin eased tensions by the advocation of troop withdrawal from the border and called for dialogue. This relieved markets but remains highly volitile and vulnerable to any Russian action.
The RBNZ Governor 'jawboned' the KIWI back below 0.8700 and threatened intervention. The reality is that the RBNZ continues to raise interest rates pushing the NZD higher and this checks any commentary or short term intervention. Walk the walk! Wheeler is living in lala land if he thinks he can raise rates and keep the currency under control. Here is a tip..... keep interest rates low in line with every other central bank.
The AUD stalled at 0.9330 after the recovery in the USD and some disappointing Retail Sales. The domestic focus remains on budget speculation as the media hits frenzy levels. Roll-on Tuesday and lets hope the prozac kicks in shortly. Collinson FX market Commentary: May 7, 2014
The market is an explosive cocktail mix with an equity bubble fueled by Central Bank largesse, war drums beating across Central Europe and China growth slowing. The US Economy is slowly improving with Unemployment falling although a collapse in growth must send tremors through the markets. The Fed continues to operate the tapering program but this still allows further stimulus through QE Infinity.
The Feds Balance sheet is destroying the Dollar, with the EUR 1.3930, despite a basket case economy! The UK is slightly better, still mired in deficit and debt, but has the consolation of its own currency. The GBP is heading back towards a high of 1.7000 although this must be considered in the context of the measured reserve currency! OECD Global Growth forecasts were reviewed lower with emerging markets under pressure.
Slowing growth has capped commodity demand and prices. The AUD has been impacted by this, but remains comparatively strong, moving back towards 0.9400. The 'rock star' economy remains ahead of the field, boosted by the RBNZ, on the move. The only developed nation that has determined to embark on a interest rate-raising strategy.
This is presumptuous, at best, and risks stunting growth and the recovery. The fear of a housing bubble has sparked action, which has overshadowed the impact on the currency. This disadvantages the trade sector which has been the driver of the economic recovery. The KIWI continues to 'fly' breaking 0.8750 with seemingly no ceiling!?
May is historically a volatile month and all the ingredients are there for some pretty drastic moves. Collinson FX market Commentary: May 6, 2014 Flash from the Collinson Mobile App: RBA leave rates unchanged at 2.50% Australian dollar rises vs USD and NZD after the release
The week spluttered to a start with no real drive from markets in the US. Chinese Manufacturing PMI was released earlier in the Asian trading day and missed expectations, coming in lower than expected, at 48.1. It was only a slight miss, but remains a contraction (under 50), thus doing nothing to support commodity demand. The AUD was slightly weaker on the news, with local Building Approvals falling 3.5%, not helping.
All eyes, in Australia, have been on market speculation over the all-important first Liberal/National Budget which is expected to be a tough one. Today markets will be keenly awaiting the RBA rate decision and the associated commentary on the Australian economic situation. The AUD is steady at 0.9275 ahead of what is expected to be a hold. The KIWI continues to outperform, trading up to 0.8660, in the face of an improving economy and the attraction of rising interest rates.
The Ukraine is heating up, with the Ukrainians attempting to regain Eastern parts from Russian revolutionaries, by military means.This situation is in extreme flux and could erupt in to all out war plunging markets into turmoil. US Non-Manufacturing beat expectations, after important improvements in Employment, and the Fed's tapering confirms an stronger economic situation. There are many risks threatening nervous markets and remember the old adage regarding May.......! For more on Collinson FX and market information see:
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