by Collinson FX
San Francisco - 18ft International - Day 3, 11 September 2013
Collinson FX market Commentary: October 19, 2013
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Markets have moved on from the US Government shutdown and the Debt Ceiling crises and are digesting the effects and fallout.. The immediate impact is on economic data releases and on GDP growth. The shutdown is said to have negatively hit GDP growth and delayed and deferred economic data, led by Non-Farm payrolls and Unemployment numbers.
The delayed numbers will be released, but the result will probably mean that the Fed will not act to taper this year. Yellen ascends to the throne in the New Year and that will complete the Doves take over and dominance of the Democrats.This will continue to overwhelm markets with liquidity and undermine the Dollar.
The EUR continued to rise, hitting 1.3680 and the GBP 1.6150. The long term prize is yet to be realised but inflation and blow-out Bond rates should be a direct result. Bond rates will be the warning bell.
Equities break record levels and risk appetite is on the rise. This is reflected in the associated currencies with the AUD hitting 0.9670 and the KIWI approaching 0.8500! Momentum is definitely up but this is October!?
Collinson FX market Commentary: October 18, 2013
Markets resumed normal trade overnight after the US reached an agreement to lift the debt ceiling and re-open Government services. The focus immediately went on to the Fed and their actions on monetary policy. Yellen is due to assume the throne after Bernanke retires and the prospects are fantastic for monetary doves. Yellen is an academic with well publicised left political leanings.
Her slant will be towards monetary expansionism in the vain hope that this will encourage economic activity and lower the unemployment rate. The consequences will be far more severe with an immediate reaction obvious in the behavior of the Dollar. The EUR surged to trade 1.3675 and the GBP to 1.6150. The US printing presses will be running hot with the Fed underwriting Treasury debt, in what was once considered a cardinal sin....monitisation!
The risk currencies received an even greater boost, with the AUD jumping to 0.9600, and the KIWI testing the big figure of 0.8500!
Central Banks, in the form of the RBA and the RBNZ, need to react and slash interest rates to combat the destructive behavior of the the Fed, ECB and Bank of Japan. Cut interest rates to compete, or the destructive impact of currency manipulation will destroy export markets. It is not sound monetary policy but price takers are just that!
Collinson FX market Commentary: October 17, 2013
Equity markets surged as a deal has been done in the US Congress. Republicans caved and the US Government will open until next January and the Debt Ceiling has been extended until February, 2014. The deal is an overwhelming win for the Democrats who now get to carry on spending at record levels destroying the budget and the Dollar.
The Political fall-out will be even greater, with the likely collapse of Republican credibility/support and could see the fall of the House Speaker. A return to 'normal' will now mean a focus on the economy and expectations should not be high. The suspension of the US Government has resulted in a lack of official data which will now resume.
The flood of data will swamp markets and analysts will digest this and will be reflected in the markets.
Currencies have remained steady throughout these dramatic political times with the EUR trading 1.3530 and the GBP 1.5950. Commodities surged and the AUD recovered lost ground to trade 0.9530 with the KIWI breaking back above 0.8400. Equities will breathe a sigh of relief until economic realities hit home.
Collinson FX market Commentary: October 16, 2013
The stalemate continues in this deadly game of chess the two political parties continue to participate in. The House put forward a plan which was vehemently rejected by the Senate leader, Reid.
He continues to work with Republican members of the Senate for a short term debt extension and a temporary re-opening of the Government. Democrats sense a capitulation and a going in for the kill with the Republicans taking the heat in the Polls.
A face saving exit would all the would need but the Democrats intend to destroy the enemy. Trapped their is little choice but capitulation would be political suicide. Markets remain calm with equities giving up the previous days gains and currencies remaining steady.
The EUR traded 1.3515 and the GBP 1.5980 with no official US official data.
The AUD surged above 0.9500 yesterday after positive news from the US and held overnight despite the uncertainty. The NZD has also booked gains with attractive alternative investment prospects for investors disappointed in the USD.
The KIWI traded above 0.8350 but could be vulnerable with a failure in US negotiations. Still all about Washington!
Collinson FX market Commentary: October 15, 2013
Expectations are rising in Washington, that a deal to avoid the debt default, is likely to be done. The Senate leaders have been negotiating, as have a bi-partisan group of Senators, which is likely to result in some sort of solution which will be sent to the Republican House.
All Congressional leaders are scheduled to meet with Obama and Biden at the white house to address the situation. Biden is a known negotiator and may have an influence on his intransigent boss. The prospect of a deal turned equity markets positive after early losses.
There is no major data releases in the US as it is Columbus Day holiday and the Government remains closed for business.
The EUR rose back to 1.3560 and the GBP approached the significant 1.6000 level. Commodities also recovered, boosting associated currencies, with the AUD rising to 0.9460 and the KIWI surging back towards 0.8350. Focus remains Washington.
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