Daily Market Commentary
US Markets remained static after recovering from early losses. Fears surrounding growing tensions in the Middle East, as Oil Tankers are under attack from what looks to be the Iranian Revolutionary Guard, raising risk levels in markets. This boosted the safe haven currencies of the USD and to a lesser extent, the Yen. The EUR retraced to 1.1200, while the GBP fell sharply to 1.2580, pre-occupied with the Prime Ministerial elections. US Retail Sales were steady and Manufacturing and Industrial Production remains strong. The US economy remains powerful and the rising risk sentiment, that is boosting the Dollar, also reflects the global currency wars underway. Central Banks are engaged in 'Quantitative Easing', with rate cuts and increased liquidity injections. All eyes now move towards the two day FOMC meeting and to a lessor extent, Bank of England and Bank of Japan. The market has priced in a 86.3% chance of a Fed rate cut, which has driven equity markets higher, but be prepared for the Fed to forgo the opportunity. This would surprise markets and may cause a sharp correction in equity markets.
In contrast to the strong US economic data, Chinese Industrial Production fell to 17 year lows, although still remaining relatively strong. The underlying macro threat to markets, remains the ongoing US/China trade war. This has directly impacted the trade exposed, commodity currencies. The rising risk sentiment, has added to the pressure on the currencies, with a stronger reserve. The AUD has fallen all the way back to 0.6860, while the NZD has plunged below 0.6500, once again.
The coming week will be dominated by trade wars and Central Bank speculation, rhetoric and action. There will be a great deal of global economic data releases, which will focus of the impact of global trade wars on growth in said economies. The rising tensions in the Middle East, remains an extreme Geo-Political risk, with war drums beating.
Weekly Market Calendar
17/6 NZ Services PMI, UK House Prices, NZ Dairy Auction, Empire State Manufacturing, NAHB House Market Index
18/6 NZ Consumer Confidence, Australia Consumer Confidence, Australia House Prices, China New Home Sales, RBA Minutes, EU Trade, EU CPI, German/EU ZEW Economic Sentiment, US Home Sales, US Building Permits
19/6 NZ Current Account, Japan Trade Exports/Imports, EU Current Account, UK CPI, UK House Prices, EU Construction, FOMC 2 Day Meeting
20/6 NZ GDP, Bank of Japan Rate Decision, UK Retail Sales, Bank of England Rate Decision, US Current Account, US Weekly Jobless Claims, Philly Fed Survey, US Leading Index, EU Consumer Confidence
21/6 Australia Services/Manufacturing/Composite PMI, Japan CPI, Japan Manufacturing PMI, France/German/EU Services/Manufacturing/Composite PMI, US Services/Manufacturing/Composite PMI, US Existing Home Sales
Thanks and Regards
Paul Bettany
Collinson & Co
0406-744-923