by Collinson FX
AucklandCupDay2-220313 (46) - 2013 Auckland Cup, Day 2
Collinson FX market Commentary: May 31, 2013
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The 'backward-forward' market has become a paradox as improving economic data is greeted with contraction of risk markets and bad news is heralded with rallies in equities with expectations the Fed will continue to flood markets with even more record liquidity. University of Michigan Consumer Sentiment hit six year highs, at 84.5, and the Chicago PMI rose to 58.7, beating all expectations.
This good news was greeted with the biggest losses in equities for the month as the inverse corruption by the Fed worked its magic. This experiment in Monetary largesse is an effort to stimulate a failing economy but is succeeding in corrupting markets, distorting interest rates and creating risk bubbles. It can only end in misery with exploding bubbles and even worse recessions. The global economy is undergoing a major realignment and capital and labour employment needs to adjust.
Bernanke and Kuroda continue this mindless expansion of the Money Supply to counter fiscal ineptitude and force savers to pay. The revival in bond yields is a red flag which they need address immediately. This week is littered with important economic data highlighted by Central Bank decisions in Europe, Britain and Australia and important Job reports in the US, which will determine market direction. Any good news will probably result in risk markets falling in a perverse corruption of free markets concocted by Bernanke and Co!
Collinson FX market Commentary: May 31, 2013
Conflicted markets continued on the roller coaster based on the Fed's QE policy. This state of corruption of free markets is more worrying and Bernanke and Co should make immediate plans to withdraw and reduce their record balance sheet.
The economic data was weaker today so equity markets rallied in a direct inverse relationship to reality!? Weekly Jobless Claims rose 10,000 and GDP was reduced from 2.5% to 2.3%, reflecting the anemic state of the US recovery. Pending Home Sales rose 0.3% but was much less than the expected 1.5%. The Dollar, conversely fell as recent currency trends reversed.
The USD/JPY retraced back to 100.90 after another dramatic day on Japanese bourse. Equities spilled 3.8% as the JPY gained strength reversing recent moves in response to the radical Bank of Japan stimulatory plan. The EUR also regained 1.3050 and the GBP back above 1.5200 despite weak Consumer, Business and Industrial Confidence data releases. Commodities gained with the fall in the Dollar dragging associated currencies along for the ride.
The KIWI held 0.8080 and the AUD 0.9675, boosted by a strong rise in Building Approvals. Capital Investment contracted 4.7% amid a surge in withdrawals of planned investment projects in mining. Recent reports have revealed the extent of falling productivity and rising costs putting the Australian market one of the most expensive to do business.
Competitiveness has been falling steadily but the extent of declining investment has alerted economic observers. This is a worrying trend at a time of economic decline and political disarray. International markets will continue to drive markets with Central Banks in the driving seat!
Collinson FX market Commentary: May 30, 2013
Equities retraced yesterday's gains as the previously good economic news was tempered by the fear of the Fed's 'tapering' of QE.
The ridiculous situation markets find themselves in is solely down to Central Bank intervention corrupting markets. In 'the Ben Bernanke' world, good news is bad and bad news is good!? An economic recovery is seen as a negative as this may drive less money printing and continued weak data would sustain QE infinity.
Surely this corruption and conflict would result in less intervention from the Fed. Capitalism must have the freedom of market demand and supply to rule or end up like the socialist mess that is Europe! US Bonds retreated from the recent gains but remain a warning sign as long dated yields continue to rise reflecting the fall in demand and the fact the worm may have turned!
The USD also dipped with the EUR 1.2933 and the GBP 1.5125. Commodities reacted to the falling Dollar and pushed associated currencies higher after testing substantial technical support levels.
The NZD/USD is back around .8100 and the AUD is back to 0.9630 after falling to the mid-0.95's which would spell a massive sell signal. The AUD has taken a sustained hammering over the last month or so and this is at critical levels.
Local economic data is benign and the floundering Labor Government lurch from one disaster to the next. Economic redemption is nigh but the worry is how much damage these incompetents can inflict upon the 'lucky country' before they are summarily dismissed?
The OECD has concluded that the US will lead the global recovery with growth tipped at 1.9% for this year and 2.8% for the next! Global growth was reviewed back to 3.1% from 3.4%.
It would pay to be sceptical of any recovery as it cannot be sustained under the over-indebted state of most western nations without massive inflation.
Collinson FX market Commentary: May 29, 2013
Risk markets surged overnight after some strong economic data from the US has supported the extended bull-run.
Charts are technically predicting a correction as all signs point to overbought in equities but the parallel US Dollar rally has confused signals. The Dollar is a safety play and contradicts the surge in risk appetite. A recovery in economic fundamentals partially explains the conundrum. The Case-Shiller Home Price index has pushed Home Values to 7 year highs and Consumer Confidence has surged to levels not seen since 2008!
The recovery seems to be broad based and ironically may signal the end of the equity rally as the Fed 'tapers' QE to remain ahead of the curve!? Moodys have upgraded the US Banking sector from negative to stable for the first time since the GFC. All signs are good for the USA and the success may force the end of the monetary party thereby killing the equity rally.
The Dollar surged with the EUR retracing back to 1.2870 and the GBP 1.5060. Commodities will be beneficiaries of the upturn in growth although the strength of the USD will temper any gains. The AUD traded over night 0.9640 (0.9575 a massive testing level) and the KIWI 0.8100 reflecting the external push/pull pressures.
Bad economic news has triggered QE, boosting the economy although the good news will have the opposite effect. It will be the extent of the 'tapering' of QE that determines the impact on Equities and Currencies.
Collinson FX market Commentary: May 28, 2013
US Markets were closed overnight for Memorial Day long weekend making it a slow day on the markets. UK Markets also had a long Bank Holiday weekend so European activity was positive but low. Japanese Equities crashed 4%, at one stage of the days trade, in what was seen as a correction to the massive moves up from the extreme QE policies employed by the Bank of Japan.
The Yen also rebounded from the huge recent losses due to the revolutionary expansion of Monetary and Fiscal policy. The experiment underway in Japan will be watched closely as any sucess could see the EU adopt a similar strategy. European markets stabilised with the EUR 1.2930 and looking for some US direction when markets reopen tonight. Italy has three crucial Bond auctions this week which will be observed closely after recent gains in Spanish Bond yields.
The AUD traded 0.9635 and the KIWI 0.8050 with little local data releases or imported action from global markets. Look closely at Central banks and Housing Data from the US for this weeks direction.
Collinson FX market Commentary: May 27, 2013
Equity markets experienced a volatile week with speculation over the Fed’s QE policies and their long term sustainability. Bernanke seems to be hinting at a ‘step-down’ or ‘tapering’ as economic conditions improve which put the frighteners on investors.
The QE pump is the main driver of the risk bubbles being generated in equities and markets are slowly becoming immune. The realisation is being reflected in the slow rise of US Bonds and the Dollar despite the ocean of liquidity flooding the markets.
The rising Dollar is hitting commodities and the associated currencies. The AUD is now trading 0.9650 and the NZD 0.8080.
The DOW closed flat after an early sell-off as participants squared up for the Memorial Day long weekend in the US. The new week will continue to be dominated by Central Bank speculation and key economic data release.In the US markets will eagerly await housing data and GDP as a gauge of growth. Expect a quiet open on Monday with US markets closed!
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