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Collinson FX Market Commentary- February 7, 2013 - European Bulls

by Collinson FX on 7 Feb 2013
SKUD 18 in able/disabled mode - Day 4, Oceanbridge Sail Auckland 2013 © Richard Gladwell www.richardgladwell.com

Collinson FX market Commentary: February 7, 2013

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European leaders are set to gather to discuss current issues after what has been a bullish start to the year. All EU problems are behind them now they have solved the debt/deficit crises and have robust growth, solving all ills. Absolutely amazing that pundits accept the current economic/political situation with deficits running as high as ever, building ever increasing debt which is unserviceable in most cases.

The EUR retraced back to 1.3500 and the GBP continues to capitulate at 1.5650. In the US, there was little political or economic activity, in terms of releases, and the markets stuttered. All eyes will be on the ECB and the BofE later tonight with their take on the robust nature of the recovery. With little ammunition in the armoury, it will be about the commentary more than anything.

The situation remains dire and because the spotlight is off, little attention is paid. These problems remain and will come back to haunt investors. Bulls remain deluded and reality will eventually strike home with avengeance.

The AUD stumbled after Retail Sales contracted 0.2% as the political turmoil continues.

The AUD struggled to hold 1.0300 and looks set for further assaults despite the lack of action from the RBA. The poorer cousin, NZD, continues to hold above 0.8400 but remains tenuous.



Collinson FX market Commentary: February 7, 2013

The Dow broke through the all important 14,000 barrier for the first time since the global recession hit markets. The flood of liquidity must go somewhere and equities provide some return unlike fixed interest. The scramble to invest is a direct result of the panic to avoid 'missing the equity boat'!

Non-Farm Payrolls disappointed falling to 157,000 and Unemployment rose to 7.9% but this was ignored with 2012 data revised upwards and analysts confident the economy will support risk investments. The University of Michigan Confidence index surged to 73.8 reversing previous economic indicators. This was all the cash flush bulls needed and they jumped in boots and all. The record start to the year continues with gay abandon, fueled by Bernanke and wheelbarrows full of money.

The KIWI continued to reflect the assault on the USD, rising to just under 0.8450, after the RBNZ notably missed the opportunity to cut rates in response to the rising 'currency wars'. The AUD remained trading around 1.0400 as political turmoil engulfs the nation. The longest election campaign in history was closely followed by the arrest of crucial MP Thomson who props up this disastrous administration. The situation has deteriorated with a string of resignations from the cabinet as the rats abandon the sinking ship.

All eyes will turn to the RBA when they announce their rate decision with the heat on them to respond to the Fed and BoJ.

The coming week will continue to monitor the progress of the bulls on equity markets as technicals point to no ceiling in sight. ECB and the BoE will come into focus later in the week with little capacity to cut rates but their attitude to Money supply and commentary will have an impact.

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