Collinsonfx Daily Market Commentary

President Trump made an upbeat speech to the Economic Club of New York, lauding the US economy as the 'strongest ever' and confirming progress on the US/China trade deal. Markets took this as a vote of confidence and equities rallied to record levels. US economic data continues to outperform, as do corporate earnings, supporting booming markets. The US Dollar remains strong, with the EUR slipping back to 1.1010, despite an improving ZEW Economic Sentiment. The ZEW Sentiment report was huge improvement, but still remained negative, while the GBP traded 1.2850 supported by stronger Employment data.

The stronger reserve continues to add pressure to the trade exposed, commodity currencies. The AUD drifted back to 0.6840, while the NZD fell back to 0.6330, ahead of the RBNZ OCR today. The NZD had been rallying but a recent reversal in fortunes, has hinted at a further rate cut. This cut would only match the NZ cash rate with the RBA's current rate of 0.75%, but is still significantly discounted to the US Federal Reserve. The currency war is being conducted through Central Bank monetary policy and the discounted rates do not reflect risk, but rather acts as a monetary stimulus and will have far reaching consequences.