Collinson FX Market Commentary- August 21, 2012 - Mixed messages

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Collinson FX market Commentary: August 21, 2012

Mixed messages from Europe sent stocks lower although quiet economic data releases restricted moves. The Bundesbank has reiterated their reservations with regards the ECB's intended Bond buying program.

The reality is that Germany becomes the lender of last resort to a spiralling out of control Europe. A story was also circulating of the ECB imposing a cap on EU Bonds, would have enormous implications in terms of free market operation with far reaching unintended consequences. Merkel meets Hollande Thursday so this may have an impact as they mutually attempt to reassure markets. The EUR has traded sideways at 1.2350 and the GBP reaching 1.5700.

In the US, the Chicago Fed's Manufacturing Index slid lower but the lack of a dramatic collapse in the economy prevents the Fed intervening. Markets will look to the EU Debt/Deficit crises developments for direction and the Fed minutes later in the week.

The AUD stabilised to trade 1.0450 with political rumours swirling of an early election driven by a failure in the Budget surplus and an avalanche of pressure from failed economic policies. A look at the RBA minutes may give insight to the Central Banks view of economic conditions.

The KIWI also held below 0.8100 with not much going on domestically. Central Banks and leading politicians will provide market direction with technicals pointing to substantial resistance on the upside!

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