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Collinson FX Market Commentary- December 13, 2013 - NZ jawboning works

by Collinson FX on 13 Dec 2013
ISAF Sailing World Cup, Melbourne Day 5 - Nacra 17 - Gemma Jones and Jason Saunders (NZL) © Richard Gladwell www.richardgladwell.com

Collinson FX market Commentary: December 13, 2013

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Pressure continues to grow on the Federal Reserve to embark on a tapering program to reduce ever increasing monetary stimulus. QE Infinity can hardly be justified now economic data has confirmed an improvement in the US and Global economies.Retail Sales rose 0.7% and continued a trend in growth and employment improvement. The likelihood the Fed will begin tapering the QE Infinity program next week has hit equity and currency markets. The USD has regained some lost ground, with the EUR slipping back to 1.3750 and the GBP 1.6330.

Commodity currencies were also punished with the AUD breaking below the important 0.9000 level reinforced by local economic news flagging and the RBA Governors determined chat to get the currency lower !

The NZD dropped back to 0.8250, hit by the rise in the reserve currency, and a concerted effort by the RBNZ to jawbone the currency lower. More to come in equities and commodities as the Fed considers inaction, but nothing suggests the explosion in liquidity will be seriously curtailed.


Collinson FX market Commentary: December 12, 2013

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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