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Collinson FX Market Commentary- July 1, 2014 - NZ Economy hits wall

by Collinson FX on 1 Jul 2014
2014 Optimist Nationals, Manly Sailing Club © Richard Gladwell www.photosport.co.nz
Collinson FX market Commentary: July 1, 2014

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Equity markets are bubbling along on record highs but appear nervous with Geo-Political issues tearing up the Middle East and threatening central Europe. European economies remain flat and certainly a threat, to any concerted global recovery, despite Central bank activity. The slow recovery in Europe has been highlighted by continued deficits adding to mountainous debt levels threatening the very nature of these states.

Debt is out of control and any rise in interest rates would destroy most economies with debt servicing alone. This applies to the USA, which is accumulating a European style debt, as Obama drives them into a European socialist style economy. Central Banks will ultimately lose the battle to inflation, as supply finally overwhelms demand, exploding Bonds prices will be confirmation. The Dollar is under assault from the Fed and is collapsing across the board!

Even the doomed EUR booked gains, to trade 1.3690, while the GBP surged to 1.7100. The AUD also managed to improve, with the falling reserve, rising to 0.9430. NZ Building Permits contracted 4.6% and Business Confidence plunged to 42.8 from 53.5.

The 'rock star economy' has hit the wall as collateral damage from RBNZ policy. Wheeler has embarked on an aggressive monetary policy to raise rates in an effort to combat inflationary pressures and fight the real estate bubble in Auckland. He has succeeded in slowing economic activity, by raising the cost of capital and boosting the KIWI, which has been a body blow to the all-important trade sector.

The NZD rallied to 0.8750 and looks set for further gains with interest rate differentials providing the sugar. All eyes remain on Central Bank activity globally and important Jobs data out of a shortened week in the US.

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