Collinsonfx Daily Market Commentary

US equity markets drifted off record highs as new fears over the US/China trade agreement began to surface. The US has reaffirmed that they will invoke a new round of tariffs on Chinese exports if the Chinese have not signed 'Phase One' of the US/China trade deal. This combined with Chinese doubts circulating in the media, surrounding existing tariff cancellations, allowed the markets to drift. US Housing Starts and Building Permits both showed gains as the leading indicator, the housing market, remains bullish and supported by record low interest rates.

President Trump continued to outline his meeting with Fed Chairman Powell. Trump tweeted that he protested that interest rates were too high, relative to competitive countries. He noted the effect was a strong Dollar damaging manufacturing and growth! This is accurate and compared with Europe and Japan, who operate with negative rates and the RBA (0.75%) and RBNZ (1.0%). US rates remain at a premium to competitors rates, in most cases, thus giving a disadvantage and not reflecting risk.

The RBA minutes for November described the discussion of further rate cuts and an easing of monetary policy, but decided to defer, but kept future options open. The AUD pushed up to trade 0.6825, while the NZD also regained 0.6425, despite headwinds. It appears some upward momentum is growing but the vulnerabilities remain.