by Collinson FX
Image of the Day Phil Robertson wins his semi final match against Ian Williams during the 2012 Monsoon Cup. Kuala Terengganu, Malaysia. 8 December 2012.
Collinson FX market Commentary: December 7, 2012
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Markets remained steady despite deteriorating conditions in Europe. The ECB left rates unchanged but President Draghi offered bleak prospects with growth contracting by 0.6%.
There were no additional rate cuts but inflationary pressures fell with negative growth thus allowing even more expansion of the monetary policy. This immediately hit the single currency which fell to 1.2950. The Bank of England also kept interest rates intact and the GBP held 1.6050. The US holds steady in the lead up to tonight's all important Non-Farm Payrolls with employment tipped to remain steady.
The Challenger Jobs report indicating rising layoffs and it would be no surprise if there was a surprise tonight. Faith in US statistics has been undermined with recent employment figures as hint of political influence permeate. Australian unemployment also dropped to 5.2% against all predictions also contradicting anecdotal evidence in the markets.
The AUD held 1.0470 and the KIWI gathered strength to break above 0.8300 despite a freak tornado terrorising Auckland.
All eyes will be on Employment numbers in the States and any further developments in the EC and the Fiscal Cliff negotiations.
Brendan Casey (AUS) Finn class Oceania Leg of the ISAF Sailing World Cup 2012
Collinson FX market Commentary: December 6, 2012
The NZ Reserve bank Governor has just announced that the Official Cash rate will remain unchanged at 2.5%.
Markets rallied overnight with Obama mooting a resolution within a week. Republicans look likely to cave in to Democratic demands and allow tax rises while ignoring spending cuts. A seriously divided country now approaches the brink with the election giving Obama the high ground.
Factory Orders rose 0.8% and the ADP Jobs report was inline with expectations thereby confirming pre election improvements. The EUR remained steady trading 1.3075 and allowed bulls to regain last weeks momentum. The RBA cut rates by 0.25%, as expected, but failed to dissuade investors in the AUD which rallied to 1.0475 supporting the still healthy interest rate differential.
GDP increased by 0.5% for the quarter but incremental gains were marginal at best. The Australian economy is starting to stall and the writing appears to be on the wall with monetary policy reflecting that.
Today will focus on RBNZ intentions with little expected as the Governor balances inflationary pressures with failing growth. Macro Political decisions from the US and Europe will continue to dictate market direction.
Windsurfing Heaven - Phuket King's Cup 2012
Collinson FX market Commentary: December 5, 2012
Equity markets were flat overnight with no earth shattering news to move the needle. Obama rejected the Republicans offer for a deal on the Fiscal Cliff insisting that taxes be raised on upper income earners. The soap opera will continue until the last minute allowing a less than satisfactory result to be accepted as an emergency measure like all solutions under Obama.
Increased taxes and spending will come exasperating the already critical debt/deficit situation and driving the once great US towards socialist Europe. In Europe EU Finance Ministers met to slap another plaster on the gaping wound and the EUR traded 1.3090.
The Global Economic position did not fill the RBA with confidence as they cut rates to a record low emergency level. 3% is the level of rates post-GFC and reflects the RBA's view of Global demand with storms gathering in Europe and the US.
This had little impact on the currency which actually rose to 1.0475 as expectations were met. Look for Australian economic data to drive local markets today and Eco-Political developments in the US and Europe longer term.
Mariella - winners in the CLASSIC Class at Les Voiles de St. Barth
Collinson FX market Commentary: December 4, 2012
China's Manufacturing rose with the PMI breaking above 50, showing expansion in the sector. This is good news for growth and demand. In Europe Greece announced a debt buy back program to reduce the crippling debt that is drowning the country and dragging the EU with it.
Merkel also hinted that the Germans may accept debt write-off into the mix which further boosts the bailout package. It also removes what little credibility the EU had in terms of the single currency and rules surrounding member nations. Merkel will pay a price politically in next years elections for Greek bailouts and could pay the ultimate political price. In the US, Manufacturing contracted with the ISM falling below the all-important 50 to 49.5! This surprised many bulls who have been talking the sector higher but is instead likely to signal a trend of poor economic indicators as the economy slips back in to recession.
Theatrics continue with the Fiscal negotiations and nothing serious is likely to evolve until the deadline is upon them at years end. The drama is part of the political game being acted out with a solution likely, but that solution likely to be detrimental to the US and Global economy. Taxes will rise and the necessary cuts are likely to be largely ignored.
The EUR rallied on the news to 1.3050 and the GBP to 1.6100. Commodity currencies drifted despite the rally in risk assets with a string of weak economic data and prospects of an interest rate cuts in Australia. Australian PMI fell along with Retail Sales and Job Advertisements all confirming the deterioration in the local economy as costs rise and mining returns fall.
The RBA is likely to cut interest rates today which will relieve recent upward pressures on the currency. The KIWI tested 0.8200 although the AUD looks set to test 1.0400 on the downside. Look out for the RBA decision today to impact local markets with accompanying commentary likely to be food for thought!
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