Weekly Market Commentary
Trade dominated markets to close the week. The US announced 25% tariffs on $50 Billion of Chinese exports. These tariffs are targeted towards 'Industrially Significant Technologies', in an attempt to address the massive theft of IP and Technology, which is estimated at between $250-$500 Billion p.a.. The Chinese signalled an intention to retaliate, but have been warned by the White House, that this would result in further tariffs. The Trade War is underway.
The Bank of Japan left rates unchanged and significant QE in place. The 'dovish' statement emphasized the disappointing inflation numbers, ergo growth. The BoJ remains locked in the heavily expansive monetary cycle, in stark contrast to the Fed, who are returning to a normalised monetary policy. The ECB are committing to winding down QE, but have signalled no rate rises until at least the end of 2019, so the Japanese are bringing up the rear in terms of global economic performance.
The coming week will begin mired in the latest 'trade tensions' between China and the US. The volcanic state of Geo-Politics ensures that this will probably remain the headline for only a short period of time. European trade will become a focus as external and internal political pressures rise. Immigration is tearing the Eurozone apart, with the Italians joining the 'Eastern Bloc' with anti-refugee policies. Meanwhile Merkel is under huge internal pressure from her key political partner, the Christian Social Union, who may take down her Government.
The Dollar remains well supported though Central Bank action, while the ECB has dithered, allowing the EUR to fall to 1.1600. Commodity currencies have suffered the rising reserve, with the AUD falling to 0.7440, while the NZD trades below 0.6950. The rising reserve and threats to international trade, pose significant threats to trade exposed, commodity currencies.
Weekly Market Calendar
18/6 UK House Prices, Japan Trade, Exports/Imports, NZ Dairy Auction, NAHB House Market Index
19/6 NZ Consumer Credit, Australia Consumer Confidence, Australia House Prices, RBA Minutes, EU Current Account, US Housing Starts and Building Permits
20/6 NZ Current Account, Bank of Japan Minutes, US Weekly Mortgage Applications, US Current Account, US Existing Home Sales
21/6 NZ GDP, Bank of England Rate Decision, US Weekly Jobless Claims, Philly Fed Survey, US Home Price Index, US Leading Index, EU Consumer Confidence
22/6 NZ Migration, Japan CPI, Japan Manufacturing PMI, NZ Credit Card Spending, France GDP, France/German/EU Manufacturing/Services/Composite PMI
Paul Bettany
Collinson & Co
0406-744-923