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Collinson FX Market Commentary- May 30, 2014 - Kiwi economy falters

by Collinson FX on 31 May 2014
Mayhem, RNZYS Club Marine Winter Series - May 24, 2014 © Richard Gladwell www.photosport.co.nz
Collinson FX market Commentary: May 30, 2014

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Markets were steady again overnight with a quiet week of data releases. The exception was the GDP growth numbers in the US. The US contracted 1% for the first quarter, which was worse than expected, just short of recessionary levels.

The last quarter of 2013 managed a convenient gain of 0.1% and this was the only reason the US has avoided a slump into recession, once again! The recovery has been pathetic and this news confirms the state of the economy in the US. This is not great news globally, as the US remains the largest economy, driving a lot of consumer demand.

Pending Home Sales rose 0.4% but remains down 9.4% annually. Equity markets are on precarious high and look for substantial data release to drive direction. This has happened on a quiet trading week and May has avoided the great annual sale. Currencies have been steady wih the EUR crossing back above 1.3600 and the GBP holding 16700. Australian New Home Sales rose 2.9% and the AUD picked up pace heading back towards 0.9300.

The KIWI has struggled all week and dipped below 0.8500 overnight with the economy faltering in the face of rising interest rates. Thank Wheeler for that, although this outcome is exactly what he wanted, but for the wrong reasons.


Collinson FX market Commentary: May 29, 2014

Equities slipped with little action on the markets due to a dearth of economic data releases. With no real direction the share markets drifted from record highs looking for a reason to go higher.

The EUR continued to fall dropping below 1.3600 and the GBP 1.16710. New Zealand Business Confidence drifted lower to 53.5 from 64.8 as the economy seems to be suffering from the RBNZ interest rate policy.

The AUD traded 0.9230 with the Leading Index contracted 0.5%. The AUD suffers the media reaction to a necessary budget but will recover when reality hits home!


Collinson FX market Commentary: May 28, 2014

Markets were looking desperately for a reason to buy and found one in the form of Durable Goods Orders in the US. They rose by 0.8% after a expectations were for a contraction of 0.7%. Consumer Confidence data also managed to eke out gains and this was enough to trigger a rally in equities, building on record levels already achieved by extreme monetary excesses from the Central bankers, globally. Manufacturing activity was disappointing but largely overshadowed by growth data.

The Richmond Fed and Dallas Fed showed a fall in Manufacturing activity from the previous month but still progressed forward. European markets are still recovering from the revolution in the Parliamentary elections which is ironic!? Many nations, within the Union, are fighting to leave the Union and the Ukraine is literally fighting to join! It is amazing what the temptation of money will bring! The trouble is that the money must come from some where!? It is the contributing nations that are failing to see the risk/reward. The unforeseen bureaucracy monster has been unleashed and collateral damage is becoming apparent and vast.

The EUR dipped back to 1.3625 and the GBP retraced below 1.6800 amid assurances from ECB President to act on inflation. Russia has taken the back seat in the Ukraine and the new President has unleashed a massive military operation against the separatists. Putin has achieved much of his ambitions but will be sorely tested from attacks upon resident Russians.

The KIWI limped along to 0.8540 after disappointing trade data although the AUD showed some support rising back to 0.9250. Markets are looking for a reason to rally but remain vulnerable to Geo-Political developments and a floundering global economy.


Collinson FX market Commentary: May 27, 2014

The open to the week was quiet as the Americans celebrated Memorial Day. There was little in the way of economic data releases in Europe or Asia although NZ Trade data surprisingly fell, with both Imports and Exports contracting. This had little impact as initial softness in the currency was recovered during European trade. The KIWI traded 0.8550 and the AUD 0.9235. The big news overnight was the European elections which was devastating for the single market.

Voters abandoned traditional pro-European political parties and moved to the left or right. The common thread was the anti-European move, which is hardly a surprise, considering the disaster they have foisted upon member nations. The concept was excellent, on a trade basis, but the establishment of yet another level of Government and bureaucracy was not. The bureaucracy is undemocratic and unrepresentative as the seat of power moves further from the people. The imposition of mindless regulation, from upon high, and tax collection reminds many of bygone eras.

The concept of a single currency was good, but the design and implementation, was a complete failure. Fiscal unity is conceptually flawed and the problems do not end there. Fiscal consolidation relies upon uniformity and operating within boundaries. This can, clearly not, happen with a huge divergence between Southern Countries and the North. The people have voted and they have elected non-European members of a European 'Union'?!?

In the UK the Independence Party(UKIP) overwhelmed all three traditional Parties and the Right Wing Nationalist Party in France obliterated the incumbent Socialists. This mood has been building and is not likely to dissipate in National elections. The EUR was not impacted, trading 1.3650 and the GBP 1.6850. Close attention will be focused on the US markets when they re-open after the long weekend.

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