Collinson FX: August 16, 2018 - NZD holds up

Oceanbridge NZL Sailing Regatta, Day 2, February 5, 2018 © Yachting New Zealand

Collinson FX: August 16, 2018 - NZD holds up

Update 157 Oct 2018 @0200: The NZD/USD is now at 0.6599 for the current rates see: collinsonco.com/forex-fx

Equities turned sour overnight, as markets continued to react to the growing trade war between the US and Turkey, with the Turks retaliating. President Erdogan has announced massive tariffs on US goods, in retaliation for the US sanctions, choosing to fight the administration. The US demands the release of an American Pastor, but deeper reasons underlie, with the NATO member becoming more autocratic and theologically Islamic.

The Dollar continues to rule the roost, with the GBP falling to 1.2690, while the EUR slipped to 1.1345. The British CPI continued to reflect inflation and the Bank of England will act, as soon as ‘Brexit’ progresses. Commodity currencies continue to suffer the global trade threat, with the AUD trading 0.7230, while the NZD holds 0.6550. US economic data continues to support the aggressive monetary policy dictated by the Fed, which drives the bullish Dollar.

Oceanbridge NZL Sailing Regatta, Day 2, February 5, 2018 - photo © Yachting New Zealand

Markets recovered some ground overnight, with a rebound in the Turkish Lira, while another terror attack hit London’s Parliament. Chinese Retail Sales and Industrial Production were steady, while employment was weaker, not inspiring over-confidence. German GDP was flat, although overall EU GDP crept up to 2.2%, confirming the improvement cited by the ECB recently. This did little to assist the EUR, which continued to shed ground, falling to 1.1330. The Dollar remains on a bull-run, supported by strong economic growth and tightening monetary policy. German economic sentiment remains steady, confirmed by the ZEW report, although overall EU sentiment drifted.

Chinese data did little to interrupt the wounded commodity currencies. Trade winds buffet these trade exposed countries and currencies. The reserve continues to rally strongly, pushing the AUD back to 0.7230, while the NZD held just above 0.6550. The ‘trade wars’ remain a major driver of these currency moves, while a China/US trade agreement, may underwrite some sort of recovery.

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