Collinson FX Market Commentary- 23 May 2012 - The European oxymoron

Ryan Godfrey goes aloft to repair a ripped sail soon after leaving Miami. Onboard Puma Ocean Racing during leg 7 of the Volvo Ocean Race 2011-12, from Miami, USA to Lisbon, Portugal.

Collinson FX market Commentary: 23 May 2012

Markets continued a week of recovery after the previous shaking most investors confidence. The commitment from China and Europe to the Growth concept while embracing fiscal responsibility has given confidence to the corrective rally.

Semantics seem important to World Leaders and 'austerity' has been rejected and 'growth' is now the term. It is insane! How can they have growth without investment and capital? The concept of raising further debt to finance public investment is crazy as most EU nations do not have the ability to raise further debt as their balance sheets are beyond tipping point.

Debt has overwhelmed their ability to service the interest payments. Posturing and verbal games do not fix the deficit or debt crises faced by most. Germany will not stump up for all these seriously compromised economies.

The EUR continued to falter trading 1.2715 and the GBP fell to 1.5765. The OECD reviewed global growth lower from 3.6% to 3.4% reflecting deteriorating economic conditions. Fitch downgraded Japan to AA+ from AAA with their Debt to GDP ratio climbing to an unbelievable 239%!

In the US equity markets corrected for a second day running but this may just be a technical correction. 'May' being the operative word. Existing Home Sales rose 3.4% beating expectations but the jury will remain out until we see a series of positive data coming from the Housing sector.

NZ Inflationary expectations drifted with benign economic activity and soft commodity prices. The KIWI is off lows, trading 0.7585 and the AUD 0.9850. Commodity demand is weak and these currencies remain vulnerable to further jolts from Europe.

Collinson FX market Commentary: 22 May 2012
Markets rebounded overnight as last weeks losses sparked bargain hunters to return. The G8 summit closed with little achievements and a new platitude.

Growth is the word now catering to the new political mantra from newly elected French President. The aspirational notion of 'growth' is what all countries desire. It is a conceptual economic desire all countries have such as profitability, balanced budgets, surplus, low inflation etc. The only problem is how to achieve these growth targets.

The French idea seems to be to invest through borrowing. A new plan is afoot to raise debt through EU backed bonds. A new socialist concept of spreading the risk and responsibility for borrowings. Socialized debt across EU members would be repugnant to Germany who would assume many of EU debts on behalf of the Citizenry.

The Chinese Premier backed calls for growth with inflationary pressures subsiding and everything to gain from economic stabilisation of its markets.

This boosted commodity currencies with the KIWI stabilising at 0.7620 and the AUD moving to 0.9870. The EUR remains weak trading 1.2770 with Greece extremely vulnerable.

G8 members advocated support for Greece to remain in the Eurozone but the Bank runs in Greece and Spain threaten the Banking sector and the EU. The dyke is springing leaks and Politicians have limited fingers. Keep watching the train crash!

Collinson FX market Commentary: 21 May 2012

Equity Markets were preoccupied with the unprecedented float of Facebook which was impeded by technical errors on the Nasdaq which may be a sign of foreboding!?

Equity markets were finally awakened to the omnipresent nightmare that Europe has become. Moody's downgraded 16 Spanish Banks which attacks the EU Banking system and the very heart of the EU.

Attention now turns to the G8 meeting this weekend at Camp David and any solutions they may provide. These International meetings offer little in historical terms but provide fantastic photo shoots on the world stage. Great for the political egos!

The EUR continues to melt, trading at 1.2770 and the GBP down to 1.5810.

In the US, markets were totally preoccupied with the new IPO and with little economic data to drive markets, they were engulfed with the negativity spreading from Europe.

Commodity based currencies continued to collapse with the KIWI falling out of bed. The NZD dropped to 0.7550 and the AUD looking to test 0.9800.

Next week will look at economic data and in particular housing in the US but they will be overwhelmed by events unfolding in the European train crash!

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