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Collinson FX Market Commentary- December 12, 2013 - An excuse gone

by Collinson FX on 12 Dec 2013
ISAF Sailing World Cup, Melbourne Day 6 Thomas Saunders (NZL) (Laser)- Silver medalist © Richard Gladwell http://www.richardgladwell.com

Collinson FX market Commentary: December 12, 2013

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Congress negotiated an agreement on the Federal Budget removing another excuse from the Federal Reserve to remove monetary stimulus.

The major reason for running money printing presses white hot was to stimulate an economy that was flat and risks were given as Employment, Growth and Fiscal upheaval. The Fiscal obstacle looks to have been removed with Republicans seeming to have learnt their lesson. Agree to the excessive deficits and debt or suffer the political consequences! The other pre-requisites appear to have been fulfilled with unemployment continuing to fall (now down to 7%) and GDP growth apparently above 3%! This means the Fed is running out of legitimate excuses to continue to expand the Balance sheet through QE Infinity.

Equity markets acted accordingly and slumped with the Dollar staging a revival. The EUR dropped below 1.3800 and the GBP fell to 1.6380. Risk curencies felt the effect more dramatically, with the AUD dropping back to 0.9050, after GM announced closure of the major domestic car producer, Holden. The KIWI also dropped back to 0.8230 with the RBNZ rate decision and associated commentary possibly offering up some compromise on recent restrictions!?

Legitimacy is at stake with the Federal Reserve and excuses have run out. There is a school of thought that believes the endless supply of money to pay for ever expanding Government is the final solution.....surely not!?


Collinson FX market Commentary: December 11, 2013

Equity markets drifted lower, as consideration was given to an improving economy, forcing the Fed to curb monetary stimulus. Budget talks draw to a climax, culminating in a deal by the 13th of December, giving some fiscal stability to markets and removing yet another excuse from the Fed.

The likelihood of tapering improved, but markets are sceptical, as the Dollar continued to flounder. The EUR rose to 1.3770 and the GBP to 1.6440, after a reduction in the UK trade deficit and steady Industrial and Manufacturing production.

Chinese Industrial production continued to impress, holding 10%, and Retail Sales rose 13.7%. This boosted demand for commodities and thus the associated currencies. The AUD rose to 0.9150 and the KIWI just under 0.8300.

The pressure exerted upon the risk currencies of late has come from the Central Banks but support remains, with the only threat, 'Tapering'!

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