by Collinson FX
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Collinson FX market Commentary: November 27, 2012
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Stocks opened the new week in the US lower with growing doubts about evasion of the fiscal cliff. Politicians are toying with the fiscal cliff with many seeing tax rises and cuts to defense as more than just palatable, attractive even.
Democrats are expected to be divided over this and a grand coalition of post-election euphoria is disappointing quickly. Obama may hobble an agreement but taxes will rise and entitlement spending will continue to spiral out of control. In Europe, EU members failed to agree on the new seven year budget but all managed some successful photo opportunities. EU Finance Ministers gathered to approve the release of the next tranche of the Greek Bailout.
Debt has overwhelmed the country with GDP contracting thus preventing the servicing of existing debt at discount interest rates. The next step will be an interest rate moratorium followed by debt write downs. This is a broken state and the continued support is untenable but preferable to the collapse of the single currency. The EUR trades below 1.3000 while the GBP holds 1.6000. In the US the Dallas Fed's Manufacturing Activity Index contracted 2.8 and the Chicago Feds Activity Index also fell 0.56.
Economic data will not be great short term and Political procrastination should ensure a return to global recession by the new year. Doha Global Climate Change should sort out the Earths warming by taxing the richer nations providing some relief. It is working well in Australia with the largest global Carbon Tax reducing temperatures to sooth the populace!
Commodities remain steady with the AUD holding above 1.0400 and the KIWI just under 0.8200.
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