Weekly Market Commentary
Volatility continued to haunt markets beyond October. The trade wars dominate conversations, as Trump raises hope of the Chinese/US Trade agreement, while expectations are tempered by his key economic advisor. Larry Kudlow denied any major progress, despite the Trump/Xi coordination, which sent equity markets into flux. US Jobs reports were positive, beating expectations, with long awaited advances in wage growth. The strong labour market will influence the upcoming Fed meeting, in terms of rhetoric, rather than action.
The Dollar regained some mojo, with the EUR trading below 1.1400, while the Yen moved back above 113.00. The strong labour market will support positive monetary policy from the Fed, despite Trumps attack on rising rates, independence assured. Markets will be consumed by the US Mid Term election on Tuesday. A republican victory will green-light the US economy and ensure a capitulation from the Chinese on trade. If the Democrats manage to regain the 'House' in Congress (GOP should hold the Senate), then this will temper market confidence, sending negative sentiment. Markets hate uncertainty, so expect volatility until the election is settled.
The Chinese will deal, but they await the election result, like every one else. The AUD slipped back below 0.7200, reacting to the reserve rally, while the NZD drifted back to 0.6640. Trade exposed currencies have rallied strongly with the prospect of a trade settlement between the US and China. They are heavily dependent on an agreement, thus the US election is central, deciding terms. Expect an agreement this month so it can be penned at the G20 at the end of November.
Central Bank activity will influence currencies, with both the Fed and the RBNZ having their say, inaction likely but rhetoric important.
Weekly Market Calendar
5/11 China Current Account, NZ Dairy Auction, NZ Commodity Prices, Australia Job Ads, China Services/Composite PMI, UK Services/Composite PMI, US Services/Composite PMI
6/11 Melbourne Cup, Australia Consumer Confidence, RBA, German Factory Orders, France/German/EU Services/Composite PMI
7/11 NZ Employment, RBNZ inflation report, German Industrial Production, EU Retail Sales, US Weekly Mortgage Applications
8/11 RBNZ, Japan Current Account, Japan Trade, China Trade Exports/Imports, German Trade Exports/Imports, US Weekly Jobless Claims, FOMC
9/11 NZ Home Sales, China CPI, UK Trade Exports/Imports, UK Industrial/Manufacturing Production, UK GDP, University of Michigan Sentiment.
Paul Bettany
Collinson & Co
0406-744-923
paul@collinsonfx.com