Collinson FX Market Commentary- February 13, 2014 - Chinese jump

by Collinson FX on 13 Feb 2014
Collinson FX market Commentary: February 13, 2014

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Equity markets consolidated gains with great affection for the certainty that Fed President, Yellen, gave them. Yellen noted the improved economic conditions that warranted continued tapering although the stimulus continued, but at a reducing rate.

The House passed a 'clean' debt ceiling bill removing another obstacle of political uncertainty from the equation. The EUR was steady at 1.3590, but the GBP jumped to 1.6580, after the Bank of Englands inflation report. The UK is a notable improver in Europe, with reviewed GDP growth numbers, from 2.8% to 3.4%.

Chinese Exports jumped 10.6%, as trade numbers continue to expand, boosting commodity prices. This assisted associated currencies with the AUD hitting 0.9050 and the KIWI consolidating above 0.8300.

Central Bank action and commentary continue to dominate market direction.

Collinson FX market Commentary: February 12, 2014

Yellen held the line and was rewarded with a market rally despite the continuation of the tapering program. The 'steady as she goes' philosophy was welcomed by markets, as her dovish reputation may have tempted as delay, but did not. She testified that it would take a 'notable change in the outlook' for any change in the QE program.

The Dollar did not respond to the Chairman's endorsement with the EUR rising to 1.3650 and the GBP 1.6450. Commodities all booked gains as the reserve was dealt a further blow. Confidence in Yellens undertaking has not been endorsed by markets and commodity currencies reflected this as equities surged. Capital flows to assets with returns and thus the AUD surging through 0.9000 and the KIWI broke back above 0.8300.

Australia has been hit by the closure of the last major car maker,Toyota, but this was telegraphed long ago with the costs of manufacuring prohibitive. The local economy is rich in resources, which continue to supply a high standard of living, but a transition must be made in the manufacturing sector. House prices continued to rise, along with business confidence, with the closure relieving some distortion of capital flows.

Equity markets surged, but remain in bubble territory, which will test risk appetite.

Collinson FX market Commentary: February 11, 2014
Markets were in the 'calm before the storm' with the storm being Yellens first report on Monetary Policy tomorrow. Expectations are extremely high with her reputation as a 'dove' to be tested.

Tapering has been implemented and the economic recovery is, apparently, underway!? The last couple of Jobs reports have been very weak and the temptation must be there to suspend the tapering and reinstitiute full-blown QE Infinity.

The target Unemployment rate, presents a dilemma, as it continually falls to previous set target levels. The problem is that all signs point to a corruption in reality, due to the lowest unemployment participation rate, since Jimmy Carter. The Monetary Policy report will be the most important this year and a big determinant. Lack of commitment to tapering could bring an avalanche of USD selling and reinvigorate the equity rally.

Currencies remained steady ahead of Yellen, with the EUR trading around 1.3640 and the GBP 1.6400. NZ House prices remained strong but signs of a slowdown in the housing market continue to infiltrate.

The KIWI was steady at 0.8250 and the AUD was trending in the mid-0.89's. Direction will be determined from the US Fed's analysis and interpretation of economic progress and the actions to be taken.

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