Collinson Forex Daily Market Commentary

Daily Market Calendar

US equity markets closed out the year flat, but after logging a tremendous year of gains, especially the tech heavy NASDAQ, which gained nearly 44% for the year. The rally in tech stocks has been firmly centred around AI, which has driven market confidence with the opportunities and possibilities. The strong economic growth numbers in the US have been driven by massive fiscal spending, funded by debt. The piper is being paid by US debt monetisation and monetary expansionism. If the perception of the 'Dollar World' changes in 2024 then there will be a lot of chickens coming home to roost. The European experience has been dramatically bad, with the 'engine room of Europe', Germany, in a state of de-industrialisation dragging the Eurozone into recession. The German economy was born and blossomed on cheap Russian energy, which has now gone, while wars in Eastern Europe and the Middle East threaten both Europe and the US. These are among the potential threats in 2024, but the impost of high interest rates, will likely diminish. The EUR will close out the year above 1.1000, while the GBP will consolidate above 1.2700. The coming year will test currencies, as Central Banks begin to cut interest rates, and the impact this has on inflation, considering energy restrictions.

Commodity currencies have been the beneficiaries of a softer reserve, with the AUD trading around 0.6800, while the NZD has regained 0.6300. Their continued performance will be very much dependent on commodity prices, which have demand constraints, suffered from recessionary conditions in Europe. The looming interest rate cuts in the US may offer opportunities for these currencies, as inflation remains stubborn in both Australia and NZ, boosting the prospects of increasingly attractive interest rate differentials. Long term prospects for 2024 will be heavily dependent on Geo-Political events globally, including wars and potential 'black swan' events such as the re-emergence of the Banking crises and or growing de-dollarisation.

PLEASE NOTE THE VIEWS EXPRESSED IN THIS COMMENTARY ARE THOSE OF THE AUTHOR AND NOT COLLINSON & CO

Paul Bettany   I   Collinson Forex Limited    Collinson & Co.  Private Banking   

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