by Collinson FX
Young 88 Dangerzone - 2013 Auckland Cup, Day 2
Collinson FX market Commentary: May 29, 2013
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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 seven 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.
240313AucklandRegattaDay3 (43) - 2013 Auckland Cup, Day 3
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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