by Collinson FX
Image of the Day Swan fleet sails along the Costa Smeralda - 2012 Rolex Swan Cup
Collinson FX market Commentary: September 12 2012
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Good news is bad news and bad news is good! It is a wonderful world of make believe seemingly infantile in the nature. Bad economic news brings the prospect of further Central Bank intervention and thus further liquidity slushing around an already flooded economy.
The news from the US has been weak and deteriorating and yet risk appetite is on the rise with the prospect of QE3. Equities are now trading at 2007, 5 year highs on the sugar high of monetary stimulus.
Fundamentals are dreadful and something must give... besides the US$! German Courts look set to sanction the ECB's Bond Bailout package which gave momentum to equities and currencies.
The EUR rose to 1.2860 and the GBP 1.6075. China has endorced the projected growth rate of 7.5% giving confidence to commodity markets and boosting the AUD back to 1.0450.
The KIWI also booked gains rising to test 0.8200 with further rises in the local Real Estate market as House Prices surge. Moody's have indicated the AAA status of the USA may be under threat unless they address the spiralling Debt/GDP ratio.
This had little effect of market confidence as the addicts look to the Fed for further assistance Thursday!
Collinson FX market Commentary: September 11 2012
Economic data continued to disappoint markets with Asia leading the way. China disappointed with trade weakening and the Chinese stimulus is an attempt to address this through a domestic replacement. Chinese Industrial Production has also slowed with inflationary pressures growing. Japan GDP suffered from weaker trade numbers and now the two biggest economies in Asia are reflecting the recessionary nature of the global economy.
The Bond-Bailout package has drawn a line under debt costs for imperiled nations allowing some space but done nothing the address the cause. This week will focus closely on the German Courts and their preference to support the ECB bailout. The decision will come ahead of a meeting of the 'Troika' of the ECB, EC and IMF. Another headliner from Europe is the elections in the Netherlands which should reflect the reluctance of the people to support the EU and the bailouts.
The US has taken the new measures in Europe and bought risk with the USD falling and equities rallying strongly. Markets will watch Europe and the FOMC rate decision. The EUR remains well supported at 1.2750 and the GBP trading around 1.6000. US markets are now relying on QE and Central Bank intervention as economic conditions deteriorate.
The AUD remains well bid trading 1.0330 and the KIWI dropping under 0.8100.
NZ Trade data confirms the global contraction as does yesterdays fall in Manufacturing. The RBNZ will announce their plan of action which will be nothing as usual. They should cut rates and provide stimulus in an effort to boost the domestic market and counter the unrivaled liquidity in Asia, Europe and the US!
The Reserve Bank will be wary with the boom in the housing market taking advantage of low interest rates. House Sales rose 16.2% and House Prices 1.3 for the last month. Low interest rates are one part of the perfect storm. Demand has risen with limited supply as building costs have skyrocketed over the previous decade.
Auckland has led the way and has now risen above pre-GFC levels and presents a problem to authorities.
Equities are looking nervous and any major moves will impacts currencies and commodities.
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