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Collinson FX: January 21, 2020 - Boris leads Brits on Trade Deal hunt

by Collinson FX 21 Jan 11:58 GMT 22 January 2020
Ben Saxton & Nicola Boniface (GBR) reach for the sky - Medal Race - Nacra 17 - Hyundai Worlds, December 2019 © Richard Gladwell / Sail-World.com

Collinson FX: January 21, 2020 - Brits go on Trade hunt

Markets reached for further record highs, as US markets holidayed, celebrating Martin Luther King. World leaders gather in Davos for a global forum. It is another massive gathering of elites to prance the world stage and accomplish very little. Surprisingly the President of the USA will attend and his address will be worth the entry fee, alone!

He will cause controversy, but he will advertise the huge progress the US economy has made and highlight policies of low tax, deregulation and bi-lateral trade agreements. The AUD fell back to 0.6865, while the NZD attempted to hold 0.6600, in the face of a rising reserve.

The UK PM, Boris Johnson, held an African forum in Britain, which sets the table for economic and trade ties with African nations ahead of Brexit. The PM will use Davos to establish relations with priority countries, that the UK will target for trade agreements. High on the list is the USA and Commonwealth nations.

The GBP attempted to hold 1.3000, in the face of a strong Dollar, while the EUR slipped below 1.1100. The USD operates at a substantial premium and will therefore continue to dominate.

Collinson FX: January 17, 2020 - US markets surge to record levels

US markets continued to surge in to further record territories, supported by the surge in global sentiment, resulting from the ‘Phase One’ trade agreement between the US and China.

President Trump signed the agreement which allows the US to increase exports to China by $200 Billion over two years. The other key components of the agreement is addressing IP transfers, financial services de-regulation in China and currency manipulation. The Fed released an important measure of the US economy, in the ‘Biege Book’, which confirmed modest economic progress and did not indicate any changes in monetary policy. US Retail Sales increased by 0.3%, in line with estimates, while the Philly Fed Survey showed large improvements.

The EUR was steady, trading around 1.1130, while the GBP jumped to 1.3070, as Brexit fast approaches. German CPI was steady, holding at 1.5%, hinting at slightly better growth numbers, coming down the pipelne.

The US/China trade agreement was a boost to the trade exposed commodity currencies, with the NZD pushing up to 0.6630, while the AUD posted initial gains but suffered in overnight trade. The AUD fell back below 0.6900, as markets consider the impact of the ‘bush fires’ on the economy and the prospects of further interest rate cuts from the RBA, to compensate.

Markets look set to ride the wave of positive sentiment, triggered by the fall-out from ‘Phase One’ US/China trade agreement, to close out the week.

Collinson FX: January 16, 2020 - Big win for Trump Administration

A huge victory for the Trump administration in the signing of the Phase One US/China trade agreement. This agreement signals a massive reform in world trade, where trade agreements will dictate US/China trade relationships, rather than the unbalanced WTO. Included in the agreement are an increase in US exports and regulation over IP transfers and currency controls. This is a massive victory for the US economy and also for global markets. Some certainty returns to the international supply chain, which should boost sentiment. The trade agreement was welcomed by markets, with US equities charging once again into record territory, while gold and oil prices continued to drift off.

The US Dollar drifted off, after direct criticism from President Trump of the Fed’s monetary policy. Trump indicated that the US Dollar was strong and supported by high interest rates, relative to their major trading partners. The US Dollar is supported by the interest rate differential, while in Europe interest rates are negative, reflecting a huge contrast. Key economic advisor to the Trump administration, Larry Kudlow, also announced tax cuts coming later in the year. This will be a massive boost to the already robust economy.

The softer reserve allowed the AUD to consolidate above 0.6900, while the NZD held 0.6600. The US/China trade agreement will be a boost to these trade exposed nations and currencies. There is not a great deal of local economic data being released this week, so the currencies remain exposed to international data and events.

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