by Collinson FX
MRX - 2013 Auckland Cup, Day 2
Collinson FX market Commentary: June 21, 2013
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The Fed has spooked markets with an across the board, broad-based sell-off in equities, bonds and commodities. Bernanke has now signaled a tapering of QE with cessation likely in 2014. This has threatened the supply of the drug to the addict and markets reacted accordingly.
The DOW shed 350 points and commodities were routed with hard commodities smashed headlined by Gold hitting 2 year lows and followed by energy and soft commodities. The reaction was a product of a trigger from the Fed then hitting technical stop losses adding momentum with a smidgen of bad economic news from China. The Flash Chinese Manufacturing PMI fell to 48.3 from 49.2 confirming recent trends. The only positive news was that bonds were hit hard early but recovered to curb losses and currencies also reacted with some control. Then EUR traded 1.3200 and the GBP back to 1.5500 with no huge rebound in the dollar.
Commodities were hammered but currencies fell disproportionately with the AUD dropping to 0.9160 and recovering to 0.9200. The KIWI fared similarly, falling to 0.7711 but regaining 0.7750 after some disappointing local GDP growth numbers soiled economic confidence. The Fed has overwhelmed economic data with US Exisiting Home Sales rising 4.2% and the Philly Fed survey rising.
Leading Indicators showed marginal gains and Jobless Claims rose, but all of this was largely ignored in the face of the Feds commentary. Trade will continue to focus on Central Banks who will watch growth and employment markets.
The correction in equities was not a bloodbath but any extension to the moves could result in panic in risk markets!
Collinson FX market Commentary: June 20, 2013
Markets were benign until 'the Ben Bernanke show' started enunciating his view of the world and the Feds reaction to them. The DOW plunged in reaction to the Fed's redefinement of Monetary Policy.
Bernanke appears to be shifting the goalposts with triggers defined as 6.5% Unemployment redefined as a 'threshold not a trigger'. A more rubbery target has resulted in a new strategy of 'moderate it's pace of bond purchases later this year'. QE may end mid-2014 after tapering in the interim. The economic outlook in the US is said to be improving with risks on the decline according to Bernanke, so he must have a pair of rose coloured glasses that are on issue at Wall Street!
The resurgence of the Dollar and a rally in US Bond Yields has pushed commodities lower and resulted in a squeeze on associated currencies.
The AUD has reacted accordingly falling towards recent lows trading 0.9280. The KIWI followed, retracing back to 0.7865 with more downside risks. Commodity/High Yield currencies are now in a down-trend so it would pay to buy the rallies! Central Bank interventionism looks to be coming to and end and the exit strategy must necessarily enhance the 'Big Dollar'.
Collinson FX market Commentary: June 19, 2013
All eyes were on the Fed as the FOMC began the all important two day meeting. There has been considerable speculation that tapering will commence at this meeting but the market has ignored this view as equities have rallied strongly towards the record highs in defiance. Bernanke has already set the parameters with 2.5% growth and unemployment back to 6.5%.
The Growth/Inflation will be ball-park but the US is at least a year away from 6.5% unemployment. Bernanke's days are numbered, with Obama virtually sealing his fate which he has already intimated. It may be he will Preside over a massive expansion in the Money Supply in an effort to counter fiscal ineptitude but without the opportunity to set the pathway back to Monetary sanity. It seems he will out do his predecessor in terms of liquidity and Greenspan succeeded in creating huge market distortions in the form of bubbles!?
The Dollar remained surprisingly strong,considering the markets belief in continued QE with the EUR trading around 1.3400 and the GBP back to 1.5650. The important ZEW Economic Sentiment indicator in Europe rose boosting the single currency but the GBP slipped after the Bank of Englands new Governor took the hospital pass. Inflation is on the rise and QE is all but exhausted, so the Debt/Deficit scenario remains critical, while growth weak.
Relatively good compared to the EU! Housing Starts in the US rose 6.8% but this was tempered by a fall of 3.1% in Building Approvals! Commodities were mixed with Energy up and hard commodities lower. This did not help the AUD, which was undermined earlier, by the release of the RBA minutes.
The RBA suggested a weak economy and further space for interest rate cuts, which pushed the AUD back to below 0.9450. The KIWI dipped to 0.7950 with the moves but regained towards 0.8000, looking towards todays trade data. The focus remains zeroed in on the Fed and the results of the FOMC meeting tonight!
Collinson FX market Commentary: June 18, 2013
Markets were controlled by speculation of the Fed's actions arising from the FOMC meeting this week. A report from the Financial Times suggested Bernanke would announce a tapering of the $85 Billion QE infinity Policy this meeting. This cut the big gains being booked on global equity markets.
Status Quo was the expectation prior to this report and markets had been surging strongly. The article pared gains as speculation is overwhelming market fundamentals. The USD regained some momentum with the EUR back to 1.3360 and the GBP to 1.5715. In the US, the Empire State Manufacturing reported gains and gave a positive outlook for Manufacturing in the zone. This complimented a rise in the NAHB Home Price Index.
The Bulls have come out refreshed but this all relies on Ben Bernanke. Commodity demand fell and prices reacted accordingly, which pushed demand for the associated currencies lower. The KIWI fell back below 0.8000 as the USD regained some ground despite local Consumer Confidence rising. The AUD fell back to 0.9550 with momentum flagging and local news of stalling new vehicle sales.
Political turmoil is rife as Parliamentarians return to the Capital for their final sitting before the election. The political instability can not be helping the Australian market which is being reflected in the currency. Market determinations will revolve around the Fed and their announced decision.
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