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Collinson FX Market Commentary- August 18, 2012 - Markets flatline

by Collinson FX on 18 Aug 2012
Image of the Day Team Vodafone Sailing ORMA 60 - Audi Hamilton Island Race Week 2012, - Audi Hamilton Island Race Week 2012 day 2. Craig Greenhill / Saltwater Images © http://www.saltwaterimages.com.au

Collinson FX market Commentary: August 18, 2012

Markets remained flat for the week although closing up on extremely low volume making many nervous. The European debt crises fell from the headlines with Merkel endorsing Draghi's Bond Buying program.

Next week will see a summit between the major protagonists of Merkel and Hollande.

This is a clash of political philosophies of epic proportions but may need to be diplomatic and present a united front. The results will be unitary and conciliatory in the name of the EU or any divisions will be ruthlessly exploited by the markets.

The USD rallied on some improved economic data with the University of Michigan's Consumer Sentiment rising slightly. Leading Indicators also managed a gain of 0.4% boosting the Dollar and releasing some pressure on commodity prices. This has an impact on the corresponding currencies with the KIWI down to 0.8070 and the AUD taking a big figure hit.

The downward pressure seems to have triggered some short selling sentiment and may now look vulnerable on the downside with many predicting a major realignment! This week will focus on the European summit and housing data from the US.


Collinson FX market Commentary: August 17, 2012

Angela Merkel travelled to Canada to discuss the EU debt crises with the PM,Stephen Harper, and reiterated her support for Draghi's Bond buying plan. This was enough to boost markets after moving sideways all week. Equities and Commodities both booked gains despite weak economic data.

In the US, manufacturing continued to slide with a further contraction of the Philly Fed Survey. Weekly Jobless Claims rose although mixed housing data gave some reason for hope. Building Permits rose 6.8% but the flow on was stunted with Housing Starts falling 1.1%.

The economic data dragged on the USD pushing the EUR to 1.2365 and commodity currencies north. The AUD broke above 1.0500 again with further supply issues boosting commodity prices. The KIWI also regained some lost ground with the severe US drought impacting soft commodities.

The NZD moved up to trade just under 0.8100. No real surprises are expected for the final trading day of the week so watch for further comments from political leaders to give direction.


Collinson FX market Commentary: August 16, 27, 2012

Bad news has become good news as world markets stand on their head. Economic data has been nothing less than terrible revealing a story of recession in Europe and no solution to the debt/deficit crises. Growth has now confirmed the recession in Europe but the inability to confront the issues has resulted in a steady decline.

Economic data continues to deteriorate but the sheer lunacy of market expectations, in terms of Central Bank intervention, remains. The worse the crises deepens the higher the expectation of further monetary stimulus boosting markets!? The crazy situation is exemplified with hope revolving around liquidity and not fiscal consolidation. Stop spending more than you earn. Keynes was wrong!

In the US, markets remained steady in the calm before the storm. Industrial Production rose 0.6% and Manufacturing by 0.5% reflecting the relative improvement in the terms of trade. The New York Manufacturing Index fell, contradicting production data and sending mixed messages. The EUR traded below 1.2300 and sideway moves reflects the sentiment of market participants.

Commodities also showed little, with the AUD moving back above 1.0500 despite a fall in Consumer Confidence. The KIWI rallied back to 0.8070 in a tight trading range awaiting substantive eco-political news.
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