Collinson FX Market Commentary- October 4, 2013 - Shutdown bites

by Collinson FX on 5 Oct 2013
Collinson FX market Commentary: October 4, 2013

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The US Government partial shutdown cast a shadow across markets again overnight with equities taking a further hit. The impasse in Washington continues with no compromise in sight and Obama being far more intransigent with Republicans than he is with international adversaries.

The ISM Non-Manufacturing Report was negative which added further gloom to market participants. The EUR continued to book gains, rising to 1.3620, but the GBP returned part of recent gains, dipping back to 1.6150. Commodities were mixed and the AUD struggled to test 0.9400 levels, as did the KIWI with the 0.8300 mark.

The political battles evolving in the US continue to provide negatives for markets and the pall of the Debt Ceiling debate holds the biggest threat of all. It is hard to find positives in the current environment and confidence has taken a huge hit in a traditionally threatening month.

Collinson FX market Commentary: October 3, 2013
The US Government battled through the second day of partial shutdown with equity markets losing further ground entering the bear heaven...October! The lack of confidence, bred from uncertainty, aggravated by the prospect of the debt ceiling debate, could result in some serious damage to the worlds largest economy.

Default and downgrade would blow the socks off confidence and hammer global bond prices. These are all considerations and markets do not like them. The USD slipped, with the EUR testing 1.3600 and the GBP consolidating above 1.6220. Obama has called in Congressional leaders to find a solution, but his ineffective leadership has plagued the US in many spheres over his tenure.

Commodity prices firmed, giving the AUD a boost to 0.9380, after some steady local Building Approval data and trade numbers. The KIWI held the important 0.8300, but remains a risk currency to be 'handled with care'.

Markets remain reactionary to Political developments in the US, as current negotiations may determine the coming debt crises.

Collinson FX market Commentary: October 2, 2013

The US Government shut down and 800,000 Federal workers receive a furlough but the world did not come to an end!? Surely the loss of some 800,000 Federal workers is not going to destroy the global economy and the markets decided that too. This can only be temporary as they do perform some necessary tasks and the outcome may determine the result of the real fight looming.....the Debt Ceiling debate!

It is the compromise reached over these actions that may determine a change in fiscal policy and political ascendancy in the US. The ISM report, released overnight, showed a rise in Manufacturing activity in the US which may encourage thoughts of the dreaded tapering. The EUR remained flat, trading 1.3530, after some lackadaisical PMI Manufacturing data releases and flat Employment statistics. Commodities drifted lower with Chinese Manufacturing PMI showing no real signs of imminent break out recovery.

The impact on the AUD was inverse, as the RBA left rates unchanged at 2.5% and some positive economic reports. Australian PMI rose to 51.7 from 46.4, with New Home Sales rallying by 3.4% and Retail Sales improving by 0.4%. Economic data improvement may be a good sign domestically with the adults taking over Government.

The KIWI did not fare as well drifting to 0.8275 correcting a recent surge in the Trans-Tasman cross rate. Look for plenty more economic data and Geo-Political action to drive volatile markets.

Collinson FX market Commentary: October 1, 2013

Equity markets fell again overnight as the pending US Government shutdown appears more likely.

The deadlines are disappearing and it seems likely the shut down will occur with the Debt Ceiling debate looming large. Uncertainty prevailed overnight and another volatile October seems to be in the offing. Equities hate the uncertainty and the steady meltdown continues. The USD is not as attractive in the face of all the political warfare and the GBP continues to book heavy gains, rising to 1.6180.

Even the single European currency took heart and rallied to 1.3525. Commodity currencies continued to be beneficiaries with the KIWI breaking 0.8300 after a rise in business confidence.

The AUD also managed to break back over the 0.9300 in spite of adverse local currents. Attention will be focused on the US Government so politics will drive markets over the next 24 hours!


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