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Collinson FX Market Commentary - July 14 - US Dollar drifts

by Collinson FX on 14 Jul
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Collinson FX Market Commentary - July 14 - US Dollar drifts

Yellen appeared in front of the Senate and reiterated the previous appearance in front of Congress. The continued rise in interest rates, is expected and the contraction of monetary policy, gradual. There was nothing new in her comments which were measured and deliberate. Equities rallied to new record highs, while the Dollar drifted, despite a rally in bond rates.

The EUR trades around 1.1400, while the GBP pushed up to 1.2950, supported by steady economic data. Chinese trade expanded, with increases in both Imports and Exports, allowing a demand driven rally in commodities. The associated currencies responded accordingly, with the AUD consolidating above 0.7300, while the NZD spiked above 0.7300.

Markets will now close the week with a look at inflationary pressures in the US economy, with the release of the US CPI number, while the consumers health will be tested with the release of US Retail Sales data.


Collinson FX Market Commentary - July 13 - Canada gets 7 year itch

Central bank activity dominated markets overnight, with the Fed Chair Yellen appearing in front of Congress, while the Bank of Canada raised rates. The Bank of Canada upgraded growth forecast and raised rates by 0.25%, for the first time in 7 years, boosting the CAD and other commodity currencies. Yellen appeared in front of Congress and reiterated her intentions to end the abnormal monetary policy.

Her statements were measured and slightly dovish. She observed that 'rates would not have to rise all that much further' and contraction of the balance sheet would be gradual. The Biege Book confirmed only slight to moderate growth. The immediate effect was to allow bond yields to drift and the Dollar to soften.

The NZD recovered to 0.7250, while the AUD jumped to 0.7660, aided by stronger Consumer Confidence. Markets will operate on interpretation and speculation of Central Bank activity and the Yellen will appear in front of the Senate tonight. The EUR drifted back to 1.1400, while the GBP rallied to 1.2880, supported by stronger employment data. Markets will focus interest rates, monetary policy and their impact on currencies and equities.


Collinson FX Market Commentary - July 12 - Trump provides diversion

Markets were steady ahead of Fed President Yellen appearing before congress. There was little on the economic front to drive market direction so attention immediately diverted to politics and Trump. Revelations about a meeting between a Russian lawyer and Donald Trump Jr, have dominated the headlines, therefore taking the spotlight from positive actions the administration would like to focus on.

The NFIB Small Business Optimism report came in lower than expected undermining any gains in the currency and equities. The EUR traded up to 1.1475, while the Yen drifted below 114.00, amidst reserve softness. The NZD went in the other direction, falling back to 0.7225, following the release of weaker than expected Credit Card spending data. The AUD, in contrast, lapped up the weaker Dollar and consolidated above 0.7600.

Market will await the Yellen's engagement with congress but there is unlikely to be any revelations. It is more likely that interpretation of the nuances in language will lead to speculation. It is likely that she will reiterate a return to normal monetary policy, by a reduction in the size of the massively bloated balance sheet, while raising interest rates!


Collinson FX Market Commentary - July 11 - Week off to a quiet start

No major global economic data releases translated into a quiet start to the week. Equities booked small gains, celebrating the positive US employment data closing the previous week. Currencies were also steady, with the EUR trading 1.1400, while the GBP drifted below 1.2900.

The major event, that will influence markets, is the re-appearance of Yellen in front of congress. This is likely to be a 'nothing-burger' although there will be much speculation involving economic conditions and the Feds reaction.

Monetary Policy is pretty predictable and it is speculation that drives volatility. US markets will look at inflation and Retail Sales, at the end of the week, so until then it will focus on earnings and Central Bank speculation.


Collinson FX Market Commentary - July 8-9 - Global economic improve

July 8-9 - Non Farm Payrolls beat expectations, reinforcing the narrative for the Feds current monetary policy, although the weeds revealed a mixed bag. The US Participation rate inched up, while the Employment rate moved up to 4.4% and hourly earnings drifted.

The Employment data allowed markets some relief and a rally in equities ensued. Bond yields rallied and the Dollar posted gains against the GBP (1.2890) and the Yen (114.00)! Recent EUR strength continued, trading 1.1400, amidst the G20 Dog and Pony show.

Commodity currencies were supported by improving global economic conditions which translate into stronger demand and prices. The AUD is attempting to regain 0.7600, while the NZD remains below 0.7300 and await international directional influence.


Collinson FX Market Commentary - July 7 - Euros talk up global growth

July 7 - Bond yields are on the rise reflecting improved global growth sentiment and a less dovish approach to monetary policy by the European Central Bank (ECB) and Bank of England. The improvement in yields sucked the air out of the equity market rally.

The hawkish ECB statement has lead to massive speculation and allowed the currency to rally to 1.1420, while the GBP heads back towards 1.3000. The ADP Jobs report in the US came in lower than expected, with less private sector jobs created, while Challenger reported less job cuts.

The contradiction means even more emphasis on the all important Non Farm Payrolls data released this evening.

Australian trade data improved but was unable to halt the slide in the currency, which slipped below 0.7600, while the NZD looks to be headed to 0.7250. Employment data from the US will determine how currencies close the week.


Collinson FX Market Commentary - July 5 - A vanilla report

July 5 - Markets were quiet overnight, with the US closed for July the 4th, Independence Day holiday. Currencies hardly moved, as the EUR traded 1.1350, while the GBP drifted back toward 1.2900. The RBA left rates unchanged, as expected, re-affirming extremely loose monetary policy.

The associated commentary was vanilla, citing poor wage growth, leading to low consumer demand and growing risks on debt levels. The Central Bank did confirm that the local economy was expected to gradually improve but avoided any bullish language that could lead to speculation of a hawkish bias. They were successful, with the AUD falling back to 0.7600, while the KIWI slipped below 0.7300.

Markets should trade with new fervour when the US markets reopen this evening. There will be a sea of global economic data releases to drive markets with the USD rebound likely to be tested.

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