Collinson FX Market Commentary- February 21, 2014 - US Dollar rises
by Collinson FX on 22 Feb 2014
Collinson FX market Commentary: February 21, 2014
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Equity markets continued to book gains despite evidence of deteriorating economic data. This is being dismissed and excused by analysts due to the shocking winter weather engulfing much of the US.
The Philly Fed survey contracted 6.3% while leading indicators were flat along with the CPI. The EUR just held on to 1.3700 and the GBP slipped to 1.6630.
The Fed minutes reinforced tapering of QE Infinity which had the immediate impact of pushing the big Dollar higher. Commodity currencies reacted swiftly with the AUD dropping to 0.8950 but recovering overnight to 0.8980. The KIWI also fell back but recovered to 0.8280.
European Markets were disappointing after Manufacturing PMI data showed a retreat from recent improvements. Consumer Confidence also slipped back perhaps contradicting recent economic trends.
Collinson FX market Commentary: February 20, 2014
Markets turned negative overnight with the release of an IMF report for the upcoming G20 meeting of Finance Ministers and Central Bankers.
The IMF warned the economic recovery was still weak and downside risks remain. They noted that the recent GDP Global growth revision, from 3.0 to 3.7, was on the premise volatility in emerging markets being temporary. This may not be the case, with upheaval in the Ukraine and nervous markets. The Fed minutes will be released today and may confirm this in Ben Bernanke's last meeting.
The EUR held steady at 1.3750 and the GBP 1.6720 but tremors are starting to emerge from emerging market currencies. Housing in the US has hit the wall, with Housing Starts falling 16%! This was confirmed by Weekly Mortgage Applications dropping 4.1% and Building Permits contracting 5.4%.
Tentative markets lead to uncertainty and the AUD slipped back to 0.9000 with Leading Indicators reducing by 0.2%. The KIWI below 0.8300 although this support level is becoming increasingly important. Look to the Fed's Minutes and the G20 for direction.
Collinson FX market Commentary: February 19, 2014
Markets were ateady again overnight digesting recent gains and growing economic confidence. US Markets re-opened after the Presidents Day holiday and did little. NAHB Home Price Index slipped back and the Empire State Manufacturing Index contracted, but data has largely been ignored, due to the harsh winter weather engulfing much of the US.
The important, ZEW Economic Sentiment Index in Germany, contracted as did the Eurozone Index. This was not in line with the recent stream of positive economic data and stalled the rise of the EUR, trading around 1.3750 with the GBP 1.6700.
The Australian Economy is experiencing a manufacturing crises, with Aluminium Smelters closing, following hot on the heels of the closure of all car manufacturers. The Government has a big job addressing the transition of these industries into a more competitive areas. The high currency and top-end cost of production has heavily impacted manufacturing. Aluminium is particularly sensitive to the Dollar and with a falling international market price the decision was inevitable..
The previous Government had extended production with financial support but the writing was on the wall. The AUD ignored the domestic bad news and traded 0.9040. The KIWI is trading below 0.8300, but recent strength could be undermined if global data does not shrug of the bad weather and start to improve.
Collinson FX market Commentary: February 18, 2014
The 'rising tide is lifting all boats' with Global economic confidence on the rise. Earlier talk of a market correction from last years surge in equities was all but forgotten.
It appears emerging markets are recovering and Chinese trade has surged to boost demand for commodities. The AUD has regained 0.9000 and is looking to consolidate although the domestic economy is suffering hits from manufacturing contraction and exports under some pressure.
The KIWI has continued to build on the recovery, reflected in a rise in Retail Sales, rising from 0.2% to 1.2%. This has supported the KIWI which is traded around 0.8350. Confidence in Europe has been rising with GDP growth data confirming a slow improvement.
Italy look to promote their youngest leader and Bonds yields are rallying strongly. This appears to be broad recovery but has yet to be convincing with strong economic data support.
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