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Collinson FX Market Commentary- August 24, 2013 - Back to the Future

by Collinson FX on 25 Aug 2013
Josh Junior in the Finn - Day 4, Oceanbridge Sail Auckland 2013 © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: August 24, 2013

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Back to the future! A surprisingly bad number in US New Home Sales has injected the equity markets with confidence.

New Home Sales plunged 13.4% and the leading indicator triggered a rally in equities as the bad news reduced the liklihood of tapering from the Fed. The irony of 'bad news being good' should reflect the parlous state of the US economy and the crises that is looming. Fed Presidents met at Jackson Hole and were certainly not in concensus on the prospects of tapering.

The recovery in equities is temporary, at best, as economic conditions remain dire. The USD reflected the status quo with the EUR trading 1.3375 and the GBP 1.5560.

Risk currencies tread water with the AUD 0.9020 and the KIWI battling 0.7800. The next week will look at growth in the US and the important Case-Shiller Home Price Index.


Collinson FX market Commentary: August 23, 2013

US Equity markets were in turmoil after the NASDAQ fell over! The computer driven, Tech-stock market, was closed mid-way through the days trade and hopes were that they could open prior to the close. Equities were higher in the DOW and S&P after some serious losses emanating from the pending tapering from the Fed. Momentum was gained from positive economic news from Asia and Europe.

The Chinese Flash Manufacturing PMI broke above 50 and EU PMI numbers also gained, renewing confidence in the global economic recovery. Energy prices rose and Metals also gained, giving some hope to the recently recalcitrant AUD. The commodity driven currency has reflected weakening prices and a resurgent USD but has dug in it's toes around the 0.9000 level.

This can not be said for the country KIWI cousin which has collapsed to 0.7810 after some interference from the RBNZ, falling Agriculture prices and a stronger reserve measure. This rebound in markets is probably temporary, as recent trends are lower due to tapering adjustments in US markets.


Collinson FX market Commentary: August 22, 2013

Equity markets remained weaker in the lead up to the Fed minutes release in the US before the close. The minutes revealed that the members all agreed with the reduction of QE later this year assuming the economy continues to improve. Some members advocated an even earlier reduction in stimulus.

This was in line with market expectations and so equities rebounded strongly on the 'buy the rumour...' trade. The news is still not great for equities and bonds and the digestion of the minutes should result in further downside. The reduction of QE will reinvigorate the Dollar and this was reflected in the EUR which fell to 1.3350 although the Pounds recent strength held, trading 1.5645.

NZ Credit card spending increased 4.7% but the downward pressure from RBNZ antics and a rising USD pushed the KIWI down to 0.7850.

The AUD also has been impacted by the rally in the reserve currency breaking the big figure of 0.9000! Speculation over the effect of economic data on Central Bank action will remain the driver of equity, bonds and currency markets.


Collinson FX market Commentary: August 21, 2013
Asian equity markets tumbled after concerns over the end of the Central Bank bubble in US equities as bonds continued to sound shrill warnings. The Sell-off across Asia was stabilised in Europe and turned to the positive by the time US markets opened. There were no major economic data releases in the US which meant reduced speculation on the Fed's 'tapering' program.

Good news has recently been a negative, as it supports the tapering in Central bank monetary policy and bad news was treated as 'bad news' pushing equities lower and bond yields higher! This is a reversal of the same inversed phenomena that caused recent rallies!? Go figure!? The Chicago National Activity Index dropped, but in line with expectations, so markets will eagerly await tonight Housing data release in the US. The EUR regained 1.3400 and the GBP continued to book gains, trading 1.5675.

The AUD suffered during domestic trade after the RBA Minutes confirmed the parlous state of economic and budgetary affairs but will resist further cuts before the election. The AUD looked to test the big, big figure of 0.9000 but rebounded back to 0.9080 as US markets improved. The KIWI traded below 0.8000 after the RBNZ acted to impose restriction on mortgage ratios on banks.

The intervention is a vain attempt to control the booming property market in Auckland while not raising rates and thus the NZD. Unintended consequences! Look for further downward pressures in US Equities and Bonds as tapering approaches and this will drive markets!


Collinson FX market Commentary: August 20, 2013
The momentum of the last week continues with further pressure on equities. US markets were unable to break the inure that has siezed stock markets due to the threat of reduced stimulus. It is hard to believe that markets are so inflated and swamped in liquidity, but here we are!

The Dollar remains relatively strong due to similarly adopted Monetary policy by global counterparts. The ECB has followed the monetary expansionism and this has reduced the impact of the USD which trades 1.3333. The Bank of England has also participated in monetary largesse, due to insurmountable debt and deficit, with growth the only redeemable option. Fiscal rectitiude is the solution and the UK has invested with returns reflected in the GBP, which has moved back to 1.5650.

Bernanke will act to preserve what little historical relevance he may have but it will be too little too late! Greenspan is blamed for the same monetary vandalism that Bernanke will be. They have overplayed their hands due to Governmental incompetence and fiscal ineptitude. The experiment with the left has failed miserably and the people will recognise that emotional social wish lists never avail themselves to reality. Social progress only comes through growth and conservative economic budgeting.

Australia is learning this hard lesson with an exponential growth in debt and an uncontrolled budgetary abuse. Interest on debt has become a major component of Governmental expenditure and the budget has now become structurally broken. It appears the people will right the wrong and this may be reflected in the currency which has recovered to 0.9110 after hitting 0.9200 in yesterdays trade.

The KIWI has improved back to 0.8070, after earlier hitting 0.8100, with economic conditions slowly improving. Commodities dipped due to demand pressure which has been hit by international markets. Look to further growth prospects globally to determine central bank policy and thus equity, commodity and currency markets.

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