Please select your home edition
Edition
Collinson and Co

Collinson FX Market Commentary- July 20, 2012 - The economic paradox

by Collinson FX on 20 Jul 2012
Image of the Day Close racing at Copa Del Rey 2012 © Max Ranchi Photography http://www.maxranchi.com

Collinson FX market Commentary: July 20, 2012

Equity markets remained positive despite the continued flow of weak economic data. The global economy is deteriorating and paradoxically risk appetite rises. This incongruous phenomena is a direct result of expectations of further Central Bank intervention to pump still more liquidity in a market awash.

European news was weak with Italian Production orders dropping dramatically and Spanish Bonds rising back towards the magical 7%! The EC bailout of Spanish banks continues and was endorsed by German lawmakers. In the US the news was equally as disturbing with the Weekly Jobless Claims rising by 34,000.

Existing Home Sales fell 5.4% reflecting the continued struggle for the housing sector. Commodities continued to firm supporting the higher yield currencies with the AUD 1.0425 on fire after breaking technical chart constraints. The KIWI broke the big, big figure again trading 0.8040.

The Australian economy continues to out perform global markets with the mining sector dragging the economy along.

The remainder of the economy is under extreme pressure and remains exposed and vulnerable to any dramatic impact of demand and price hits. Central Bank intervention remains the only game in town as fiscal solutions are not forthcoming


Collinson FX market Commentary: July 19, 2012

Ben Bernanke testified to Congress again overnight reiterating the Fed's intention to act if the economy stalled and employment declined. QE3 was not imminent though, as there are signs of life in the economy. Housing Starts rose to a high of 6.3% and Weekly Mortgage Applications spiked to 16.9%.

The good news was tempered by a fall in Building Permits by 3.7%. The Fed's Biege Book revealed the usual 'economy expanded at a moderate rate' and employment growth stalled. The economic news is not good, but is not catastrophic enough for the Fed to intervene. European markets remained stable with the EUR trading 1.2250.

Commodities remain well bid boosting the AUD which has traded strongly at 1.0350. Risk appetite has supported these currencies with yield advatage alhough the KIWI has faultered at the big figure of 0.8000.

Markets have gained all week so the focus will be the economy and earnings in the US markets which will drive global equities and currencies.


Collinson FX market Commentary: July 18, 2012

Bernanke hinted that the Fed was prepared to pull the trigger on QE3 if the markets showed further signs of deterioration. He warned that the 'fiscal tax cliff' faced by the US and the EU debt crises remained significant risks to the economy.

Market analysts read QE3 possible which was a boost to equities and negative on the Dollar. This was a tonic for risk currencies which were already supported by commodity rallies from a weaker USD. The AUD is testing the significant 1.0330 which is a huge technical level after the RBA minutes showed the recent rates cuts are translating into significant growth within the economy.

AUD crosses all had substantial gains even against the shadow that has been the KIWI! The KIWI remains under the big figure 0.8000 with the cross look vulnerable. In the US, Industrial Production rose 0.4% and Manufacturing 0.7% providing some positives. CPI remained flat reflecting tepid grwoth as has been the case across Europe and other OECD countries.

NZ Inflation fell to 1% testing the RBNZ band on the downside. This is a reflection of growth and allows the Central Bank room to at least hold rates lower for an extended period! Now where have we heard that of late?

US Markets now rely on the Fed with no fiscal action expected this side of Christmas and the EU debt crises threatening. It is a precarious balancing act Central Banks are playing and extremely risky!


Collinson FX market Commentary: July 17, 2012

Further grim news from China and Europe failed to spark any risk rally with US Retail Sales confirming the conservative character of the consumer.

In China, the Premier promised further action to stimulate the slowing economy translating that they are in some trouble. The IMF, has warned of continued slowing global growth unless Europe can address the debt crises. It is hard to see a solution in the short term and little will be done in the US with November Presidential elections.

The best to hope for would be the maintenance of the status quo and sideways moves until political solutions are forthcoming. Retail Sales in the US fell 0.5% reflecting the confidence of the all important US consumer.

The consumer is unlikely to spend and capital is likely to remain on the sidelines until decisions are made! Markets will now be looking to a move to 'real QE3' and not just operation twist so concentration will be on Bernanke when he appears before the Senate and House Tuesday/Wednesday. Expectations are for a new repurchase program to pump more liquidity into markets and print more money. What a great idea as this confirms the definition of insanity. New York Manufacturing showed some signs of life but widespread recovery in this sector is unlikely.

The Dollar has retreated on the market expectations with the EUR bouncing to 1.2275. Commodity currencies found support with weak Dollar prospects and the AUD rose back to 1.0250 and the KIWI 0.7970. Economic data will determine some market direction but Bernanke will be key overnight.

For more on Collinson FX and market information see:
www.collinsonfx.com and www.collinsonwealthmanagement.com

Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |


Disclaimer: The details expressed in this website and accompanying documents or transmissions are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Collinson Forex Ltd accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.

Collinson and Co

Related Articles

Collinson FX Market Commentary - Mar 24 - US tetters on health vote
The NZD held above 0.7000, despite a rising reserve, while the AUD continued to drift lower. The RBNZ left rates unchanged, as expected, observing weaker than expected growth allowing accommodative monetary policy. The Central Bank welcomed the weaker KIWI, while jawboning it lower, to little effect. The NZD held above 0.7000, despite a rising reserve, while the AUD continued to drift lower.
Posted on 24 Mar
Collinson FX Market Commentary - Mar 23 - NZD rallies against trend
Commodities continued to lose ground and the AUD suffered, falling below 0.7700, while the NZD bucked the trend. Commodities continued to lose ground and the AUD suffered, falling below 0.7700, while the NZD bucked the trend. The NZ Dairy Auction was surprisingly bullish, paving the way for a rally in the currency, pushing up to 0.7050. The RBNZ will announce the rate decision this morning, with no movement expected, although rhetoric is likely to impact.
Posted on 22 Mar
Collinson FX Market Commentary - Mar 22 - DOW drops 200 points
The AUD fell below 0.7700, after the Bank observed the Feds 'rate rise policy' Oil prices resumed their downward moves, reflecting commodity prices, in general. This did not assist the associated currencies, with the NZD drifting to 0.7020, while the RBA impacted the AUD. The RBA minutes revealed concerns over the growing real estate bubble and weak wage growth, but it was the commentary on the US Dollar that hit the currency.
Posted on 21 Mar
Collinson FX Market Commentary - Mar 20 - GBP slips on Brexit news
The AUD pushed back to 0.7700, while the NZD regained 0.7000, awaiting Mondays Dairy Auction. The GBP slipped after the UK PM, Theresa May, confirmed the trigger of Article 50 on March 29. Oil prices drifted lower and the Chicago Fed Manufacturing Activity Index remained positive. The softer reserve allowed commodity currencies to book further gains, with the AUD consolidating above 0.7700, while the NZD pushed towards 0.7050.
Posted on 21 Mar
Collinson FX Market Commentary - Mar 19 - Handbrake pulled on excess
The AUD pushed back to 0.7700, while the NZD regained 0.7000, awaiting Mondays Dairy Auction. What could have been a tumultuous week, Geo-Politically and Economically, faded into obscurity. The Fed raised rates, as expected, pushing a dovish commentary to calm any excesses. The Dutch election saw the status quo come through virtually unscathed, allowing a massive sigh of relief for the EU, with the anti immigration party also being anti-EU.
Posted on 19 Mar
Collinson FX Market Commentary - Mar 17 - Dutch Brexit fails in poll
The AUD slipped back to 0.7660, while the KIWI drifted back to 0.6970, awaiting the resumption of the Dollar run. The Dutch elections spread relief through European markets after the failure of the far right, anti EU party to live up to pre-poll expectations. The preservation of the status quo, will reduce fears held for the EU, especially considering the pending elections in France and Germany.
Posted on 16 Mar
Collinson FX Market Commentary - Mar 16 - US Int Rate up, Dollar down
The US Federal Reserve raised interest rates, for the second time post-GFC The US Federal Reserve raised interest rates, for the second time post-GFC, confirming the embarkation of a rate rise program for 2017. There were no surprises and the associated commentary confirmed the economic recovery and calmed markets. 'Buy the rumour, sell the fact'! The Dollar retreated after the anticipated rate rise
Posted on 15 Mar
Collinson FX Market Commentary - Mar 15 - Oil prices drop
Oil Prices hit the headlines overnight, falling to $47.70, hitting energy companies and dragging equities lower. Oil Prices hit the headlines overnight, falling to $47.70, hitting energy companies and dragging equities lower. The lower prices are a direct result of oversupply, with global stocks rising, as production does not inhibit. Equities were not assisted with the prospect of rising interest rates, as the FOMC sat down for their two day meeting, with high expectations.
Posted on 14 Mar
Collinson FX Market Commentary - Mar 14 - Big week ahead
AUD back below 0.7600, while the NZD has regained 0.6900 Markets were steady on what could develop into a huge week for currencies. This coming week the UK look to trigger article 50, the 'Brexit' clause, which will impact the GBP. The Dutch go to the elections and a strong showing of the anti-EU parties could adversely impact the EUR, both short term and fundamentally.
Posted on 13 Mar
Collinson FX Market Commentary - Mar 11-12 - KIWI recovers above 69c
Commodity currencies regained some ground, with the AUD back to 0.7550, while the KIWI jumped back above 0.6900. The Dollar has been on a bull run, which is likely continue, when the Fed embarks on a rate rise program for 2017. The Dollar settled to close the week, with the EUR jumping to 1.0690, supported by stronger than expected German trade data. Commodity currencies regained some ground, with the AUD back to 0.7550, while the KIWI jumped back above 0.6900.
Posted on 12 Mar