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Collinson FX Market Commentary- February 8, 2013 - Jawboning the Euro

by Collinson FX on 9 Feb 2013
Denmark 49er FX - Day 4, Oceanbridge Sail Auckland 2013 © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: February 8, 2013

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ECB President Draghi decided to leave rates unchanged at 0.75% and jawboned the single currency lower with commentary. He sees risk to the downside within the ECB and the strength of the currency as a determining factor in the recovery.

The EUR plunged to below 1.3400 and the GBP steady at 1.5700. The Bank of England left rates unchanged and talked readiness for more stimulus. UK GDP remained at zero and Industrial and Manufacturing continued to slide. EU Ministers gather for the first summit since English PM Cameron vocalised the possibility of a withdrawal from the EU.

Threats to the Community have never been greater with Economic conditions worse than ever and a group of leaders incapable of solving the crises. In the US, Jobless Claims fell slightly and productivity fell 2% with labour costs rising 4.5%. The rise in Labour costs is great news for the worker but usually signals the rise of inflation.

This signal should be taken seriously because inflation is the biggest fear of most economists. Australian Employment remained steady but the nature of the measures are not to be believed. Full-time employment has been steadily on the decline while the numbers hold steady due to growth in part-time numbers.

Part-time is recognised as working 1 hour per week so the data is questionable at best! The AUD fell to 1.0280 and the KIWI slipped back to 0.8300.

The focus at the close of the week will be the EU summit and developments therein.


Collinson FX market Commentary: February 7, 2013

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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