Collinson FX Market Commentary- June 21, 2014 - KIWI climbs ladder
by Collinson FX on 22 Jun 2014
Collinson FX market Commentary: June 21, 2014
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Akatea - Start ANZ Fiji Race, June 7, 2014 © Richard Gladwell www.photosport.co.nz
Equity markets continued to challenge new record all-time highs supported by an avalanche of cash from the Federal Reserve. The delusional market participants continue to perpetrate the myth of a strong economic recovery.
This is clearly not supported by the data in the US, or more particularly, Europe. These economies have not recovered from the GFC and are currently more vulnerable to an economic event than they were prior to the Global collapse. US and European defiicts may have been pared somewhat, but have continued, adding mountains of debt to the outstanding deficits. Debt to GDP ratios have broken the critical 100% (red line territory) ceiling, in many cases, and an international crises would leave many defenseless. Still, keep the head deeply buried in the sand and ignore reality. The Middle East is rapidly disintegrating and Europe is in conflict between East and West.
The US ignores their place in the world and have lost respect for inept and feckless leadership. The printing machines continue to run hot, flooding markets and creating massive bubbles ready to burst. Never mind, just continue to buy shares! Bonds remain the litmus test.
The EUR struggles at 1.3600 while the GDP has held 1.7000 reflecting the weakness of the reserve currency. NZD has regained 0.8700, driven by a hapless RBNZ and carry trade,attracting capital flows. The rising interest rates will impact the economy hard and Wheeler will realise his presumption. NZ trade data release this week may be the first symptom. The AUD sliped back below 0.9400 with nothing inspirational on the domestic, economic front. The RBA is unable to offer much in the way of returns for investment. Geo-political developments remain the likely trigger of panic!
Collinson FX market Commentary: June 20, 2014
US stocks were mixed again today, hovering just below record levels, supported by the Fed's extension of low interest rates. Yellen confirmed the recovery was underway and reduced the QE by a further $10 Billion.
They are still injecting a further $35 Billion and interest rates remain close to zero. The only way this dovish Chair will raise rates is when she is forced to by the pressures of inflation. The Dollar remains seriously under pressure with the GBP rising to 1.7040 and even the wounded EUR moving to 1.3600.
The Iraqi situation continues to spiral out of control and Obama has sent 300 military advisers presumably to set the stage for air strikes to commence. Geo-Political pressures rise and bubbles stretch so look for some cracks to form. Commodities have remained firm as the reserve is hit hard.
The AUD trades around 0.9400 and the KIWI holds above 0.8700 with NZ GDP continuing to improve, encouraging the RBNZ, in their tightening monetary policy.
Collinson FX market Commentary: June 19, 2014
Yellen continued to reduce QE infinity,by a further $10 Billion,confirming an economic recovery and ignoring the growing threat of inflation. The green light was advanced by the equity markets which took the opportunity to surge towards new record highs.
The Dollar took the punch to the guts, with the expansionary monetary policies, reflected in the GBP breaking 1.6700 and even the mullet EUR moving up to 1.3590. Weekly Mortgage Applications fell 9.2%, confirming the slump in the supposed housing recovery, while the Current account deteriorates.
Perhaps the Feds bullish outlook on the US economy comes from importing bulk rose coloured glasses from China? Equities flourish and the Dollar fades, boosting commodity prices, by weakening the reserve measure.
This assisted the associated currencies, with the AUD back to 0.9400, while the KIWI breaks back above 0.8700. Destruction of the Dollar and the defective EURO are the consequences of failing monetary and fiscal policies and will ultimately burst the equity bubble.
Collinson FX market Commentary: June 18, 2014
The FOMC meeting began today and promised the status quo. Yellen is a renown dove and will continue the expansionist monetary policy but her worst nightmare is inflation! The US CPI moved north to 0.3%, which is not a lot, but marginally this can be quite unsettling.
The problem with the CPI, is that it fails to measure the real drivers of cost-of-living, thus sending shivers through the Fed.
The EUR remains under extreme pressure, trading 1.3540, while the GBP retraced from 1.7000. European economic sentiment advanced, with the all-important ZEW Sentiment Index, leading the new EU ZEW report.
The AUD has lost ground and looks vulnerable, around the 0.9340 mark, while the KIWI has settled around 0.8650. The carry trade has the potential to overwhelm the fears over economic contraction in the NZ economy.
Collinson FX market Commentary: June 17, 2014
Equity markets opened the week mixed, after retreating from all-time record highs in previous trading, due to Geo-political threats from Iraq and the Ukraine and a tepid global economic growth. The upheaval in the Middle East and Europe could drive market volatility, with the VIX on the rise, depending on developments. In the US, Industrial Production rose 0.6% and the Empire State Manufacturing survey beat expectations, slightly. This balanced the negativity driving Oil higher from the Middle East drama.
The EUR remains weak, trading 1.3550, while the GBP looks to test the big, big figure of 1.7000. European inflation is non-existent and in fact deflation is now the problem the ECB is wrestling with. The KIWI's meteoric rise, due entirely to the RBNZ, and the corresponding rise in interest rates is having an impact. Consumer Confidence slipped and House Prices contracted 1.2% for the month and 14.8% for the year.
The economy is now starting to show the effects of RBNZ aggressive policies contradicting trading partners monetary policy. The AUD continues to trade steadily around 0.9400 and look forward to Central Bank activity in the US and locally.
The RBA is set to release minutes which will be an insight to the state of the domestic economy. Central Banks and Geo-Political events will continue to drive the markets.
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