Collinson FX: Sept 14, 2018 - US Markets rally
by Collinson FX 13 Sep 2018 22:47 BST
14 September 2018
Miss Scarlett - Hamilton Island Race Week - Day 5 © Richard Gladwell
Collinson FX: Sept 14, 2018 - Markets rally
Equity markets rallied, after CPI inflation was softer than expected, taking the pressure off interest rates. The Fed are intent on returning to a normalised monetary policy, with most predicting a further rate rise, this coming month. The Bank of England left rates unchanged, after raising rates in August, to combat strong inflationary pressures. The Bank warned of ‘Brexit’ risks, while recognising global trade wars. The ECB confirmed the completion of their QE program, by years end, although interest rates are to remain at record lows for some time to come. The EUR approaches 1.1700, while the GBP jumped to 1.3100, despite global uncertainties.
Australian Employment data was strong, with the headline number (5.3%) holding, as participation continues to improve. This helped the local currency, which looks to regain 0.7200, assisted by the softer reserve. The NZD remained vulnerable, trading around 0.6550, despite a weaker reserve. The local news was headlined by the terrible performance by local dairy giant, Fonterra, which is the mainstay of the exports driven and trade exposed nation.
Trade remains a threat, with Trump putting pressure on the Chinese. He noted that the US was in no hurry for a trade deal, as the US economy is surging, while the Chinese suffer sanctions. The balance of trade, between the two countries, ensure the Chinese will relent.
Collinson FX: Sept 13, 2018 - WTO out of line
Markets were flat overnight, with little global economic data releases, while the Dollar retraced. The EUR jumped to 1.1630, while the GBP trade 1.3050, as the almighty USD drifted. The Fed’s Biege Book was not as strong as expected, with some regions not advancing as expected, which stunted the progressive Dollar.
China/US Trade talks remain the centre of market attention, as the Chinese seek relief from the WTO, who still treat the Chinese as an emerging economy with all the associated benefits. The mere reality of how ridiculous the WTO is, threatens their own continuity, as Trump considers withdrawal.
The Dollar was softer, allowing the AUD to rebound to 0.7170, while the NZD pushed back to 0.6550. Trade exposed currencies have been under pressure, but a resurgence may suggest a compromise in the offing?
Collinson FX: Sept 12, 2018 - US tech shares rebound
US Equities rallied after tech shares rebounded strongly. The NFIB Small Business Optimism report hit record highs, fuelled by tax cuts and deregulation. Small Business is a major driver of new job creations in the US economy and the optimism drives investment and strong employment for sustained growth. Conversely, the ZEW Economic Sentiment reported weaker conditions in Germany and Europe. The EUR headed towards 1.1600, while the GBP tried to hold 1.3000, as the Dollar surged.
The Chinese/US trade threatens the trade exposed nations and the resurgent USD adds to the pressure on the commodity currencies. The AUD grasps desperately at 0.7100, while the NZD tests 0.6500, on the downside. Trade developments and Central Bank rhetoric and speculation will drive markets for this weeks trading.
Collinson FX: Sept 10, 2018 - AUD crashes due to high debt
Equity markets closed the week softer, with the growing US/China Trade war looming, as Trump confirms over $200 Billion tariffs are ready to go. German Trade numbers were lower, as exports faded, while GDP growth was static. The EUR fell back to 1.1550, while the GBP broke above 1.2900, ahead of key Central Bank announcements. The ECB and Bank of England are both scheduled to announce rate decisions. The ECB has indicated an end to QE, although it will be some time before interest rates rise, but data will need to continue to improve. The Bank of England has been closer to rate rises in an attempt to combat growing inflation. The U.K. Is still mired in ‘Brexit’ negotiations, which buffet the currency.
Apart from the ECB and Bank of England, the Feds Beige Book will be released, no doubt confirming the strong economic performance. The RBA has some officials out publicly speaking, following the battering the AUD has taken recently, but are unlikely to alter monetary policy. Wholesale funding costs are rising, with Banks all pushing up mortgage rates, which is sending tremors through currency markets. The AUD has crashed to trade around 0.7100, reflecting the exposure to high levels of household debt and static income growth. The China/US Trade war is heating up, with the trade exposed nations like Australia and NZ extremely vulnerable, thus adding further downward pressures to the currencies.
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