by Collinson FX
Wired - 2013 Auckland Cup, Day 2
Collinson FX market Commentary: June 6, 2013
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The bad economic news continues to flow from Europe and the US but the difference has been the markets reaction.
The ADP Private Sector Jobs report signaled that only 135,000 jobs were added, which was 30,000 below expectations. On top of the weak jobs numbers Weekly Mortgage applications fell 11.5%!
Weakness in the Construction sector is crucial to the recovery and a slowing in employment growth reflect the insipid nature of the US economic recovery.
The Fed's Biege Book noted 'modest to moderate' growth which was neutral and does not boost the case for continued QE. The EUR remained steady at 1.3090 and the GBP up to 1.5400 after EU Services PMI fell and the GBP showed solid gains. EU GDP contracted a further 0.2% to (1.1%) for the year which is an indictment on the state of the old world, mired in Socialist political ideology.
The consumer struggles despite the record liquidity flooding credit markets. Retail Sales fell 1.1% confirming that monetary easing is not happening in the trickle down world. US equities crashed after the Jobs report signaled a reversal in the employment markets and a big move to risk aversion.
The AUD was not immune to this risk-off trade and the currency crashed towards 0.9500 dragging the KIWI back to 0.7950. This deterioration in risk appetite has been growing and may continue with special impact on equities and currencies!
Collinson FX market Commentary: June 5, 2013
Markets remained inexorably linked to the Fed and the extreme monetary policies now linked to employment and inflation. Equities turned negative after Kansas City Fed President, Esther George, advocated the tapering of QE. Pimco's, Bill Gross, commented that QE was 'more of a problem for the economy that needs structural reform!'
Central Banks are overwhelming market drivers and corrupting Bond markets and thus driving investors in search of yield resulting in bubbles. Debasement of currencies by the ECB, BoJ and the Fed have necessarily driven assets prices north, raising costs as the lack of growth controls inflation. Stagnating growth is inhibiting a rebound in global economic growth and is a direct consequence of these Central Bank policies.
The USD regained some of the previous days losses forcing the EUR back to 1.3050 and the GBP 1.5260. The RBA left rates unchanged but hinted further cuts were in the pipeline if economic conditions continued to deteriorate. The RBA has taken the opportunity to step back after the massive recent correction in the 'A Dollar'.
The inaction sparked an initial rise in the AUD but this was overwhelmed as markets digested the statement and the negative connotations.
The rise in the 'Dollar' added to the momentum pushing the AUD back towards 0.9600 and the KIWI back below 0.8000. Listen to Central bankers for trading direction and economic data for the underlying message.
Collinson FX market Commentary: June 4, 2013
When Bonds and Stocks both sell-off you tend to find bad news is bad on the economic fundamental front. We are still experiencing the the irony of 'bad news is good!' due to the corruption of markets by Bernanke and Co.
The ISM Manufacturing contracted at the worst rate in four years, falling below 50, to 49 showing Manufacturing is struggling. Construction was positve but was lower than expected and the weak data resulted in a risk-off trade with a fall in the Dollar. The EUR rose to 1.3080 and the GBP jumped to 1.5335 with steady Manufacturing PMI across Europe.
The AUD was a major beneficiary of the slide in the USD, rallying strongly to 0.9775 and the KIWI breaking back to 0.8100.In Asian trade yesterday the AUD had taken a pasting, after Chinese Manufacturing PMI contracted back to 49.2, falling below 0.9600 and the NZD dropped to 0.7950.
Fear was spreading after the massive equity/bond sell-off Friday in the US, but was arrested when markets decided the bad news would result in a further continuance of QE.
The AUD remains extremely vulnerable as a global risk target aggravated by the rise in weak local economic data and the political turmoil created by the mortally wounded, and soon to be gone, Labor regime!
Look to the plethora of US data and Central Banks for market direction to be manifested in Bonds, Stocks and Currencies!
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