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Collinson FX Market Commentary- May 24, 2014 - RBNZ presumptuous

by Collinson FX on 25 May 2014
- Day 5, 2014 Toyota Optimist Championships, Manly SC © Richard Gladwell www.photosport.co.nz
Collinson FX market Commentary: May 24, 2014

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Equity markets continued to challenge record levels in the USA, with little to question, in terms of economic data. Central Bank activity drives equity bubbles and until inflation spooks the directors of Monetary Policies, they will persevere.

The only reason inflation has not reared its ugly head is that there is no consequential growth in the associated economies. The only other panic button will be the opposite to growth and that is deflation or 'irons'. In this dire situation the signal will emanate from the bond markets, so beware! Equities booked record gains and the Dollar was steady with the EUR 1.3625 and the GBP 1.6830.

NZ Consumer Confidence dipped reflecting the presumptuous direction of the RBNZ. The KIWI closed the week lower on 0.8550 and the AUD 0.9230 after local economic data did little to drive confidence. The coming week will look at US Home Sales and GDP growth but little major economic releases will allow meandering.


Collinson FX market Commentary: May 23, 2014
The Chinese Manufacturing PMI jumped, according to the HSBC flash survey, which boosted markets across Asia and improved demand. China has been a great support for commodities and has driven the dependent economies including Australia.

The AUD has thus, fared better than most, although recent domestic economic data has exposed some weakness internally. The AUD has dropped back to 0.9220 and the KIWI to 0.8550. US Manufacturing rose to 56.2, from 55.4, reversing recent losses and translating into confidence in markets. The Dollar thus held ground against the EUR, which traded 1.3650, after negative Manufacturing PMI data from France and the single market.

The GBP has been swimming against the tide moving towards 1.6850 after further growth numbers confirmed a slowly improving economy. The UK GDP rose 3.1%, from 2.7%, and the balance of trade improved. The problem with improved trade statistics was it was due to a greater fall in imports than exports rather than expansion in both!

The week has been quiet with slow economic data release and nothing earth shattering on Geo-Political scene. Equities continue to trade on record highs but remain vulnerable which would impact currencies.


Collinson FX market Commentary: May 22, 2014

Fed minutes revealed that there was muted risk of inflation from the continued stimulus, thus allowing interest rates to remain low for a 'considerable time'. This was a shot in the arm for equities and they wiped out the previous days losses. The conclusions drawn are reasonable but ignores reality over the medium to long term. The benefits of stimulus have been best reflected in equity markets but remain a threat to a rising cost of living and destruction of wealth.

This has eroded with the value and the purchasing power of the Dollar. UK Retail Sales jumped 1.8% and looked set to put the Bank of England on a interest rate rise curve. The GBP jumped to back to test 1.6900 although the EURO still lagged at below 1.3700. Commodity currencies remained vulnerable, with Australian Consumer Confidence plunging, after the much maligned horror Budget.

The AUD has dropped back to 0.9230 and the KIWI to 0.8550. Much of the pressure on the risk currencies is internally driven but long term direction will come from external sources as these are trade exposed nations.


Collinson FX market Commentary: May 21, 2014

Equities tumbled overnight, not because of any economic data releases, but on sentiment. This week is unusually slow in terms of economic data release, so much of the moves are based on momentum and confidence. The DOW took a big hit because of vulnerability, at these record levels, that have eroded confidence of nervous investors. The EUR slipped below 1.3700, although the GBP booked gains to 1.6840. Close attention will be paid to the release of the Fed minutes tonight and the view of Yellen and other board members.

This is important because their actions have driven the equity bubble that is tested chronologically and technically. The AUD broke out of recent tight trading ranges . The currency has been stuck around 0.9350 for the last couple of weeks and the RBA minutes signalled no change in interest rates for the forseeable future. This did little to support the currency and threats to the countries 'AAA' credit rating did the rest.

The OZ plunged a big figure, to 0.9250 and remains vulnerable, improving the environment for the trade exposed sector. The KIWI was not immune to all the cross Tasman activity and slipped back below 0.8600. Geo-Political pressures have subsided and the lack of economic data has allowed nervous markets to react, so fundamentals will have a big impact, either way!

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Collinson FX market Commentary: May 20, 2014

The relief rally continued on Wall Street lead by the Tech heavy NASDAQ. There was little in the way of data for the market to focus on with Construction in the EU falling, but remaining positive, sending mixed signals.

The single currency was steady at 1.3710 and the GBP 1.6715 in a slow open, to what is expected to be a slow week, in economic developments. The RBA minutes will be released today giving the Central Banks view on the economy. This may offer some direction to a static currency, which has been trading consistently around 0.9350, for quite some time. The KIWI has also remained steady, at 0.8620, while Producer Prices held no surprises.

Europe has been diverted from the Ukrainian situation, by floods in the Balkans, which will no doubt allow another opportunity for Global Alarmists to call for further increaes in taxes. The US has been steady bumping record highs with no major correction in May....yet!?

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