Please select your home edition
Collinson and Co

Collinson FX Market Commentary- August 23, 2012 - AUS's Perfect Storm

by Collinson FX on 23 Aug 2012
Image of the Day Practice day, August 21st 2012, AC45 World Series San Francisco. Sander van der Borch / Artemis Racing ©

Collinson FX market Commentary: August 23, 2012!Click_here to find out how to get CollinsonFX's free iPhone app

The Fed's Minutes were released and indicated that QE3 may be 'warranted fairly soon' if economic conditions did not improve. The FOMC Minutes cited the European Debt/Deficit crises and the corresponding slowdown in demand spreading to China and Asia.

This was exemplified with the rising Japanese Trade deficit. Warning bells were ringing when this trade deficit was announced reflecting the serious nature of falling global demand in the worlds third biggest economy and former trade surplus superstar!.

In Europe markets await the outcome of the Merkel/Hollande summit and the response to requests from Greek PM, Samaras, for 'more air to breathe'! The suggestion of further stimulus has driven the Dollar lower and correspondingly real value commodities up. The surprise was the marginal reaction of the Equity markets who would ordinarily explode on the prospect of further Central Bank intervention.

The rally was marginal reflecting the markets expectations and the real effect of security purchases to the nth degree. Bernanke will be loath to intervene in the lead up to the Presidential elections. The EUR regained some ground to 1.2520 with the dollars reaction.

The US Existing Home Sales rose 2.3% but weekly Mortgages fell 7.4%. The AUD reacted positively rising back above 1.0500 after some disturbing investment news. BHP shelved a $30 Billion mining project at Olympic Dam,SA shadowing the much vaunted investment pipeline. Commodity prices and the strong AUD combined with limited Capital and a uncertain political climate with rising tax costs have lead to a perfect storm for mining investment.

This is the single biggest worry for the Australian economy.

The KIWI managed to move to 0.8125 pushed by the weaker USD. Eyes will be focused on the European political developments and the repercussions they will have on Global markets.

Collinson FX market Commentary: August 22, 2012

In a world where Apple has become the biggest company in US history you have to wonder? A company that produces the iPhone and iPad is selling so many, at such a huge margin, that they are now worth more than many small countries. The company is beloved by stock holders but is symbolic of the current downturn in the US.

The brains trust reside in the bankrupt California but all production occurs in China. Sales are global and therefore revenues remain global due to the US tax system. This is indicative of the 'new normal', where growth and revenue occur offshore and the static domestic growth of Western Nations continues to be mired in socialised debt and budgetary crises.

The only respite is further Central bank intervention in expanding liquidity to the banks who refuse to stimulate the small/medium business but rather invest in the impending bubble that is treasuries! The monetary stimulus is eroding citizens wealth in real terms at a dramatic rate but I guess that is the plan. The EUR rallied to 1.2480 after concerns wavered in Europe as Merkel appointee to the ECB, Asmussen, endorsed an unlimited ECB Bond Buying program.

The sheer desperation of unlimited purchase of debt is astounding. It will solve the problem short-term but builds an almost insurmountable problem down the track. Some one has to pay the interest on the debt when budgets can not meet current obligations?!Fitch has warned of further downgrades after rallies in equities hit year highs on the back of monetary stimulus prospects. A removal of cancerous cells, in the form of Greece, may well provide some support for the single currency but that is assuming that Spain and Italy do not need a cull.

The GBP broke out of technical levels on the upside after the Bank of England endorsed a steady interest rate policy.

The RBA reiterated a steady as she goes policy with steady growth and inflation. The need to intervene is not pressing with monetary policy soft providing a surety for AUD holders at 1.0485. The KIWI traded around 0.8100 despite weak Credit Card expenditure and a flight of citizens to the Australian mining sector.

The Fed minutes may provide action but focus will increase on the central bank conference at Jackson Hole!

Collinson FX market Commentary: August 21, 2012

Mixed messages from Europe sent stocks lower although quiet economic data releases restricted moves. The Bundesbank has reiterated their reservations with regards the ECB's intended Bond buying program.

The reality is that Germany becomes the lender of last resort to a spiralling out of control Europe. A story was also circulating of the ECB imposing a cap on EU Bonds, would have enormous implications in terms of free market operation with far reaching unintended consequences. Merkel meets Hollande Thursday so this may have an impact as they mutually attempt to reassure markets. The EUR has traded sideways at 1.2350 and the GBP reaching 1.5700.

In the US, the Chicago Fed's Manufacturing Index slid lower but the lack of a dramatic collapse in the economy prevents the Fed intervening. Markets will look to the EU Debt/Deficit crises developments for direction and the Fed minutes later in the week.

The AUD stabilised to trade 1.0450 with political rumours swirling of an early election driven by a failure in the Budget surplus and an avalanche of pressure from failed economic policies. A look at the RBA minutes may give insight to the Central Banks view of economic conditions.

The KIWI also held below 0.8100 with not much going on domestically. Central Banks and leading politicians will provide market direction with technicals pointing to substantial resistance on the upside!

For more on Collinson FX and market information see: and

Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |

Disclaimer: The details expressed in this website and accompanying documents or transmissions are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Collinson Forex Ltd accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.

Collinson and Co

Related Articles

Collinson FX Market Commentary - Oct 21 -
. .
Posted on 19 Oct
Collinson FX Market Commentary - Oct 15 - Positive sign from US sales
AUD breaks back above 0.7600, while the NZD looks towards 0.7100 again US Retail Sales met expectations and were positive! This gave the markets some enthusiasm and lead to further speculation for the much vaunted Fed interest rate rise. This took the shine off the equity rally. The University of Michigan confidence report was decidedly negative
Posted on 17 Oct
Collinson FX Market Commentary - Oct 14 - Chinese exports crash
The NZD rallied back towards 0.7100, while the AUD floundered around 0.7560, reversing the recent cross rate moves. Chinese Trade data dominated global markets overnight, with little economic data release of import, in Europe or the USA. Chinese exports crashed 10% for the month (5.6%p.a.), while imports fell 1.9%. The dreadful trade data confirmed the weak global demand for the world factories product.
Posted on 14 Oct
Collinson FX Market Commentary - Oct 13- It's the US economy, Stupid!
The AUD has ceded 0.7600, now trading 0.7560, while the KIWI tried to build a firewall above 0.7000. Current US GDP growth is a depressing 1%, with all reviews on the downside, reflecting the parlous state of the economy. The Fed telegraphed four rate rises this year and none have eventuated so it is hard to believe the rhetoric.
Posted on 14 Oct
Collinson FX Market Commentary - Oct 12- Light week grinds idle minds
AUD dipping to 0.7540, while the NZD dipped to 0.7050 The EUR slipped to 1.1050, while the GBP tested new lows, falling to 1.2200. Commodity currencies were not immune, with the AUD dipping to 0.7540, while the NZD dipped to 0.7050. A light economic data week allows diversion and musing over Central Bank perceived actions.
Posted on 12 Oct
Collinson FX Market Commentary - Oct 11 - Oil surges on Russian deal
Recent weakness in the NZ Dollar, pushed the KIWI back to 0.7120, while the AUD held above 0.7600. Oil prices surged to $51/barrel after President Putin confirmed collusion on a global cap on production with the OPEC cartel. German Trade data continued to show resilience with both Exports and Imports showing healthy gains.
Posted on 10 Oct
Collinson FX Market Commentary - Oct 8/9 - GBP haemorrhage continues
The KIWI stabilised around 0.7150, while the AUD attempts to regain 0.7600 The EUR pushed back towards 1.1200, while the GBP continued to haemorrhage, falling to 1.2430. Sterling will stimulate trade and when the rebound commences, watch the backlash, as there will be a correction. The KIWI stabilised around 0.7150, while the AUD attempts to regain 0.7600, despite respective efforts from Central Banks.
Posted on 10 Oct
Collinson FX Market Commentary - Oct 7 - KIWI falls further
The AUD fell to 0.7575, while the KIWI has plunged to below 0.7150 Commodity currencies were not immune to the rising Dollar, with the AUD falling to 0.7575, while the KIWI has plunged to below 0.7150. All eyes remain on the NFP's and the speculation that will ensue! He's Our Rokkii in the Toorak!
Posted on 8 Oct
Collinson FX Market Commentary - Oct 6 - US Rate rise empty rhetoric
The NZD is now testing 0.7150, while the AUD holds above 0.7600, cementing one direction for the Trans-Tasman cross. Talk of a Fed rate rise is empty rhetoric on the eve of a Presidential election. The EUR held 1.1200, while the GBP trades on lows of 1.2750, despite positive UK economic data. Commodity currencies have reacted to a general campaign from the local Central Banks aided by reinforcement from the Dollar.
Posted on 6 Oct
Collinson FX Market Commentary - Oct 5 - Dr Phil says more of the same
The AUD fell to 0.7620, while the NZD looks to test 0.7200, aided by a weaker Dairy auction. The RBA left rates unchanged, under the newly appointed Governor (Dr Philip) Lowe, who embraced continuity in words and action. The AUD was steady until the rising reserve hit the currency overnight. The AUD fell to 0.7620, while the NZD looks to test 0.7200, aided by a weaker Dairy auction.
Posted on 4 Oct