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Collinson FX Market Commentary- August 16, 2013 - US Recovery underway

by Collinson FX on 16 Aug 2013
Josh Junior before the start of the Finns - Day 4, Oceanbridge Sail Auckland 2013 © Richard Gladwell http://www.richardgladwell.com

Collinson FX market Commentary: August 16, 2013

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US Jobless fell and inflation is on the rise supporting the view that the economic recovery is underway and the time for QE Infinity may be coming to an end.

The NAHB House Market Index rose but Industrial Production was flat showing the recovery is far from robust. The EUR traded 1.3330 and the GBP back to 1.5640 after Retail Sales jumped 3%. The reduction in Central Bank stimulus has been a trigger for a major adjustment in equities and this looks set to continue as Bernanke begins to repair the Fed's balance sheet. Commodities continue to benefit the perceived economic recovery in Europe and the US and this is feeding through to the associated currencies.

The AUD has moved back to 0.9150 and the KIWI pushing 0.8060 after a rise in Consumer Confidence.

The tapering envisioned for next month continues to drive equity and currency markets and economic news can be taken either way.


Collinson FX market Commentary: August 15, 2013

The canary in the mine-shaft that is bonds, is starting to tweet and not the technology kind! A surge in Bond yields yesterday has sent a warning signal to markets which is being heeded.

QE Infinity is looking at modification in terms of 'tapering' as economic conditions improve. The Fed has frightened Bulls in the equity markets as this has been the source of global growth. Tepid economic improvement may signal the end of monetary stimulus but the underlying issues not only remain but have been aggravated by Central Bank largesse. Deficits and Debt have both continued to expand at insurmountable levels across Europe and the US and the piper needs to be paid!

French GDP turned positive, ripping the economy out of the 'double-dip' recession, and German growth also confirmed a positive. This is a good sign, although EU GDP remains negative and mired in recession. Hard to say how, with the single currency and ECB!? The EUR fell to 1.3250 but the GBP recovered to 1.5500 after positive growth and employment conditions improved. Commodities rallied with the growth news from Europe and general improvement in global economic conditions and this propped the Aud up to 0.9135 and the KIWI back above 0.8000.

NZ Retail Sales improved 1.7%, as Housing increases equity wealth and corresponding perceptions of wealth. The Housing bubble is fuelled by simple supply and demand and not positive economic conditions.

The Aussie will suffer volatility during the next few election weeks, with a surge in confidence coming from a conservative victory. A word of caution in terms of 'buy the rumour....' as the incoming Tories will have a total mess to clean up when the books are opened. Socialists are great at spending other peoples money!


Collinson FX market Commentary: August 14, 2013

Asian and European equity markets rebounded strongly after some good economic news with the important ZEW Economic Sentiment report surging in Germany and across the EU. Equities fed off the good news but this did not translate so aggressively to US markets.

Equities were positive with the NFIB Small Business Optimism report up but Retail Sales missing expectations. Retail Sales grew 0.2% but markets were expecting better. This dampened the need for tapering so the market rallied. 10 year US Bonds jumped 10 points to trade 2.73% which is a warning sign!

The US Dollar strengthened with QE tapering prospects pushing the EUR down to 1.3250 and the GBP 1.5440. Commodities booked gains but not enough to arrest the rise in the Dollar. The AUD slipped back to 0.9090 and the KIWI below the big, big figure, to trade 0.7950.

Markets will continue to trade the 'tapering trade' and the impact of economic data on Central bank future action. Housing data in the US will now assume centre stage

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Collinson FX market Commentary: August 13, 2013

Equities markets remained weak, with little economic data released from local markets who are looking towards Retail Sales tomorrow and Housing later in the week. The Dollar is creeping back up, as tapering becomes a more accepted reality.

The EUR drifted back to 1.3300 and the GBP back to 1.5475. Asian markets were not overly confident after Japanese GDP missed expectations rising 2.6%, well below the 3.6% expected. Japanese Monetary stimulus has been huge and the rebuild has boosted local markets but this decline in the rate of growth is a bit of a shock and will rattle the bulls. Asian markets have been the driver of commodity demand and these declines do nothing to support resurgent associated currencies.

The AUD slipped back to 0.9150 and the KIWI held 0.8000, with some strong housing data. House Sales rose 14.7% but prices declined 0.5% in a runaway market. US markets will be looking closely at consumer demand and the impact economic news will have on Central Bank policy.

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