Please select your home edition
Edition
Collinson and Co

Collinson FX Market Commentary- August 31, 2012 - Eyes on Jackson Hole

by Collinson FX on 31 Aug 2012
Finn start Race 1 - Weymouth 2012 Olympic Regatta © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: August 31, 2012

http://itunes.apple.com/app/collinsonfx/id533360650?mt=8!Click_here to find out how to get CollinsonFX's free iPhone app

Equity markets continued to tumble as the realisation that Bernanke may not act pre-election. The economic data releases continue to decline but not at a rate that warrants Central Bank intervention. It is the static nature of the economy globally that really challenges equity and commodity markets.

Without falling off a cliff the addict is denied the short term fix. The bloated state of US and EU economies has not translated into credit infiltrating markets as liquidity is invested into banks who reinvest into Treasuries and debt taking advantage of the spreads. The free-lunch for banks builds their balance sheets, which is desirable, but would have been preferable through banking prowess rather than Banking welfare.

The EUR declined as news leaked that Spain has resisted applying for a bailout until they no the terms of surrender. The ECB must be on the verge of a Bond Bail-out package in an attempt to limit debt servicing requirements. This will be essential but certainly no solution to the deficit conundrum. The EUR dropped to below 1.2500 with Confidence slipping from the investor,consumer and business.

In the US, equity markets reflected the reality that QE may not happen with anaemic economic data and realisation that it would probably not help. Commodities lost ground with weak demand and mild support for the USD pushing the AUD below the psychological 1.0300 level.

Hard commodities have taken a serious hit but agricultural demand has remained steady with the US drought impacting.

The KIWI has non-the-less followed big brother down below the BIG figure of 0.8000. All eyes are now on Jackson Hole and the Ben Bernanke!


Collinson FX market Commentary: August 30, 2012

The European markets remained quiet with the month of August a holiday month and Political leaders working on a solution for the EU Debt/Deficit crises. The ECB President, Draghi, has been so consumed with a Bond-Buying program that he has been unable to attend the Central Bank conference at Jackson Hole.

A solution is in the wings but this will be fundamentally a bailout to cap interest rate yields so indebted nations can afford to service their bloated debt. This does not address the deficit which continues to drive the debt north. In the US, markets have experienced extremely low activity because of the holiday season and record low interest in equity investment, outside Wall Street. The Fed's Beige Book was released and showed growth in 9 of 12 sectors although Manufacturing activity continued to struggle.

Pending Home Sales jumped 15% to 2 year highs although Weekly Mortgage Application fell 4.3%. The GDP number increased to 1.7%, which is an improvement, but is way under what is necessary for a sustained economic recovery. The economic data may be enough to convince Bernanke to hold off on further QE prior to the Presidential election.

The week will remain quiet until Bernanke speaks with the Republican National Convention and Hurricane Isaac providing some distraction. The EUR drifted to 1.2525 and risk sentiment is on the slide. The AUD fell further to 1.0350 as global demand for commodities weaken and locally Construction dropped 0.2%. The KIWI has been hit too and now looks set to test the BIG figure of 0.8000 on the downside.


Collinson FX market Commentary: August 29, 2012

Markets continued to dither ahead of Ben Bernanke's address to Jackson Hole at the end of the week. There was plenty to pre-occupy markets with the Hurricane Isaac fast approaching New Orleans to celebrate the 7th anniversary of Hurricane Katrina and the Republican National Conference.

As markets await the Wyoming Central Bank conference the ECB President, Draghi, has declined to attend citing a heavy work load ahead of the EU meeting next week. Draghi is drowned in problems with the need for a new Bond Buying program to bolster of his claims of saving the single currency.

The EUR gained ground with many believing a solution is nigh! The EUR rallied to1.2565 despite tepid economic data. In the US, the S&P Case-Shiller Home Price Index, rose 0.5% but this was countered by a fall in Consumer Confidence. The Richmond Fed Manufacturing Index continued to show weakness in this sector. Markets will continue to dawdle until Friday where many expect QE3 but Bernanke will be reluctant to act before the Presidential Elections.

The AUD continued to deteriorate back to 1.0375 after New Home Sales fell 5.6%.

The KIWI has also drifted back to 0.8050 and may test the big, big figure if commodity pressures continue to push lower and the AUD remains vulnerable.


Collinson FX market Commentary: August 28, 2012


Markets moved sideways with no major economic data releases to provide direction. The key factor in markets is the extremely low volume even considering summer trading. The confidence in equities is at historical lows as the consumer remains on the sidelines. The low volumes have still not effected the moves up as the NASDAQ trades at 12 year highs but these have been fueled by fiscal policy and the flood of cash awash in the markets.

When the liquidity is withdrawn from the economy, that will be the test and the current volumes should serve as a warning. In Europe, markets await further news on the debt/deficit crises and developments surrounding Greece. A temporary secession from the single currency is the latest rumour and jells with the chronological map of a year end departure.

It is never likely to return but more likely to serve as a precedence for other failed states. The EUR traded around 1.2500 waiting for some moves in market sentiment. In the US markets await Jackson Hole and the appearance of Ben Bernanke. It is at this venue he announced QE two years ago!

The Dallas Fed's Manufacturing Activity report dropped 1.6 cementing weakness in the manufacturing sector. Politically, the Republicans meet for the Convention in Florida as Hurricane Isaac unsettles the Gulf region. Commodities drifted lower as global demand slumps and risk appetite stalls. The AUD fell below 1.0400 and looks vulnerable to global weakness.

The KIWI also drifted below 0.8100 with little local economic news to provide direction.



Collinson FX market Commentary: August 27, 2012

Co-ordinated endorsements for Central Bank action had the desired effect on equity markets with a rally to close the week. The ECB announced the prospect of Bond-Buying to target bands for yields to restrict the cost of rising debt. This will effect markets and drive interest rates lower, short term, although the funding of this will rely on printing Euro $. This is inflationary and has the effect of destroying wealth of citizens to bankroll the fundamentally flawed and bankrupt nations.

Merkel has reiterated the need for Greece to fulfill commitments under the bailout clauses but has appeared with Samaras in Berlin to show support. Bernanke, coincidentally, also endorsed further QE action promising delivery of future dope to the addict. It is unlikely that he will act prior to the November Presidential election for fear of Political bias and the ECB is restricted by legal restraints and unity amongst members.

The EUR is trading around the 1.2500 mark and lack of Central Bank action will undermine confidence but action will undermine the EUR. Damned if you do.....!? Markets are very wary of the USD and the EUR as is witnessed by the cross rates. Central Bankers will gather this coming week in Jackson Hole, Wyoming, providing furtile ground for jawboning and markets will be determined by participants. In the US, Durable Goods orders increased by 4.2% buoyed by strong airplane orders thus supporting improved market sentiment.

The rally in equity markets failed to improve the prices of commodites as monetary stimulus does not improve global demand! This is the problem with double dip recession hitting the European market. The AUD drifted lower to trade around 1.0400 and is looking extremely vulnerable to increasingly weaker global markets.

The KIWI has reacted relatively well with soft commodities faring better and the KIWI holding above 0.8100. On to Wyoming!


For more on Collinson FX and market information see:
www.collinsonfx.com and www.collinsonwealthmanagement.com

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 - Jan 21 - New era begins for US
The weaker reserve, allowed the AUD to move to 0.7550, while the NZD held 0.7150. Trump is President and a new era begins. The new administration has outlined a broad outlook for the new USA and is expected to be highlighted by lower taxes, deregulation and fiscal expansion. The worry has been the trade policy but this will be more a renegotiation of existing trade agreements and more in the way of bi-lateral agreements.
Posted on 20 Jan
Collinson FX Market Commentary - Jan 20 - Markets steady in transition
Markets were steady ahead of the all important US inauguration for Trump tonight. Markets were steady ahead of the all important US inauguration for Trump tonight. The ECB left rates unchanged, in a dovish statement from ECB President Draghi, who observed no upward trend in inflation. By contrast, the Fed President was hawkish, commenting that goals of growth and employment were close to being satisfied, enabling interest rises in the current year.
Posted on 20 Jan
Collinson FX Market Commentary - Jan 19 - UKP surges on Brexit news
The AUD maintained 0.7500, while the NZD drifted back towards 0.7150, shy of the important technical level of 0.7200. UK PM May quelled many critics with her outline of Brexit and provided some plan for the future. Her vision of the return to a global power in trade was appreciated by markets, with the GBP surging to 1.2300, while overnight employment data remained strong.
Posted on 19 Jan
Collinson FX Market Commentary - Jan 18 - Brits opt for Free Trade
AUD trading 0.7540, while the NZD moves towards the important technical level of 0.7200. The Dollar continued to drift, as the GBP surged to 1.2400, while the EUR pushed towards 1.0700. Commodity currencies continued to prosper the slide in the reserve, with the AUD trading 0.7540, while the NZD moves towards the important technical level of 0.7200. The inauguration on Friday is the market focus
Posted on 18 Jan
Collinson FX Market Commentary - Jan 17 - Hard line on Brexit from May
The AUD drifted back to 0.7470, while the NZD held 0.7100, with all currencies being vulnerable to US Dollar swings. The Trump inauguration, on Friday, has also been the major consideration of markets this week. Doubts have surfaced about global trade and predatory industry/corporate tactics driving nervous speculation. The AUD drifted back to 0.7470, while the NZD held 0.7100, with all currencies being vulnerable to US Dollar swings.
Posted on 17 Jan
Collinson FX Market Commentary - Jan 16 - Market jitters over US moves
NZ Consumer Confidence was flat, lending little to a buoyant currency, which held 0.7100. Markets remain in a flux ahead of this week's US Inauguration with high expectations and uncertainties. The Dollar settled, with the EUR trading 1.0640, while the Yen held 114.00. NZ Consumer Confidence was flat, lending little to a buoyant currency, which held 0.7100.
Posted on 16 Jan
Collinson FX Market Commentary - Jan 13 - Trump can't save dollar
The AUD continued to rally strongly, pushing toward 0.7500, while the NZD set to break out targets at above 0.7200 The markets reversal began during the Trump press conference the previous day and continued as analysts digested the repercussions. The 'Trump effect' has been dented as a wider discussion ensues. Trumps promises of lower taxes, fiscal stimulus and deregulation have been roundly welcomed and boosted the equity markets and the Dollar.
Posted on 13 Jan
Collinson FX Market Commentary - Jan 12 - Late reversal for USD
A dramatic reversal in the Dollar has seen the AUD surge to 0.7470, while the NZD broke strongly above 0.7000! The focus remains on the US and the incoming administration. Update in late market trade in the US. A dramatic reversal in the Dollar has seen the AUD surge to 0.7470, while the NZD broke strongly above 0.7000!
Posted on 12 Jan
Collinson FX Market Commentary - Jan 11 - US Confidence surges
The AUD traded up to 0.7350, while the NZD slipped back below 0.7000, impacting the cross rate. Australian Consumer Confidence also surged, pushing to 120.1 from 113.40, which has influenced the local currency. The AUD traded up to 0.7350, while the NZD slipped back below 0.7000, impacting the cross rate. Markets remain focused on the incoming US administration while economic data drives daily direction.
Posted on 11 Jan
Collinson FX Market Commentary - Jan 10 - Australia moves ahead
The AUD reflected this, pushing back to 0.7350, while the NZD regained 0.7000. Australian economic data was positive, with construction rebounding, while Building Approvals jumped. The AUD reflected this, pushing back to 0.7350, while the NZD regained 0.7000. Economic data will drive markets in the lead up to the inauguration of Trump!
Posted on 10 Jan