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Collinson FX market Commentary: September 4, 2012
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The markets in the US were closed for Labor Day so the focus was on Asia and Europe. Chinese Manufacturing PMI continued to deteriorate falling to 47.6 in a steady downward trend.
Markets remained steady as the prospect grows of Chinese monetary intervention. Growing global economic fallout from weakening conditions are now only supported by Central Bank intervention. Bernanke has indicated a penchant for action if conditions continue to weaken.
In Europe, the ECB meeting is expected to announce a much awaited Bond-Buying program to alleviate funding pressures on Italy and Spain. Questions from the Bundesbank have been supported by the German Economic Minister likening the program to a drug administered to the waiting addict! The EUR remained steady trading 1.2590 and the GBP 1.5900 after some improving Manufacturing data perhaps reflecting some light at the end of the UK tunnel.
The Chinese problems have spread to commodity driven Australia with the AUD slipping to 1.0250. The Commodity price index slipped as terms of trade weaken. Inflation spiked to 2.2% impacted by the Govt's new Carbon Tax and Retail Sales dropped 0.8% surprising analysts who were expecting a gain.
Job Advertisements fell 2.3% tempting the RBA to cut rates at todays meeting.
Most surveyed expect no action although some may be required in the near future.
The KIWI followed back to under 0.8000 with Central Bank intervention being the only positive globally. If the only good news is further money printing markets are in real trouble!
Collinson FX market Commentary: September 3, 2012
Jackson Hole came and went.
The anti-climax was palpable, although the prospect of QE remained with Bernanke continuing to promise an additional fix. The prospect was enough to break the weeks equity losses and sustain a rebound.
The European Bailout rumbled on with the Bond-Buying Bank Bailout set to be announced in the coming week. This will temporarily allow Spain and Italy to issue enough debt at a manageable rate with the ECB funding the issuance either directly or indirectly (allowing Banks to enrich themselves in the process!).
Funding further debt does not address the cause of the problem and that is the endless deficits! Draghi has promised to do 'whatever it takes' but this will not be enough. The EUR rebounded to 1.2580 with the prospect of more US Dollars in circulation.
The new week will be flooded with economic data in Europe and the US highlighted by crucial employment reports. Central bank decisions will also drive sentiment with the BofE, ECB, Bank of Canada, RBA all announcing.
Expectations will be low, except for the ECB, but Draghi has built expectations in the Latin way.
KIWI broke back above 0.8000 and the AUD reached 1.0345.
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