Collinson Forex Daily Market Commentary

Daily Market Commentary

European markets diverged from their US counterparts overnight, with European equity markets suffering further losses, while the US surges into record breaking territory. The US are rallying strongly on the prospects of looming interest rate cuts, with further dovish comments from Federal Reserve Chairman Powell. The head of the Federal Reserve reiterated earlier comments before Congress, that they would not wait until inflation fell to the desired level of 2%, before cutting rates. Cuts are expected by September. Equities surged, with the DOW rallying more than 600 points, in overnight trade. Europe was a different kettle of fish. The ECB have already begun to cut rates, but economic conditions remain extremely grim, further evidence by sharp falls in ZEW Economic Sentiment. Sentiment was seen crashing in Germany and the EU, as the recession grips hard. European Finance Ministers also met, warning fiscal tightening needed to come in fiscally recalcitrant members, especially France. The EUR drifted back to 1.0880, while the GBP looks to regain 1.3000.

The contrast between Europe and the US is at a macroeconomic level, in terms of direction, as it is influenced heavily by Central Bank direction and Governmental fiscal prospects in Europe. The local markets are awaiting the Japanese Tankan reports, set to be released today, and the quarterly inflation report in NZ. Inflation in NZ is set to fall sharply, and this would be in line with recent dovish commentary coming out of the RBNZ, regarding possible rate cuts. This may add further downside pressure to the KIWI, which fell back to 0.6040, while the AUD dropped to 0.6720. The Chinese Third Plenum will end Thursday and strategic plans will be revealed.

Paul Bettany   I   Collinson Forex Limited    Collinson & Co.  

Private Banking   I   Mobile +64 0406-744-923  

Countries: NZ  0800 338 838 I AU  1800 143 415 I UK 0800 028 5834 I US 1888 625 7833