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Collinson FX Market Commentary- June 26, 2012 - Aversion drops ANZAC

by Collinson FX on 26 Jun 2012
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Collinson FX market Commentary: June 26, 2012

Markets continued to meltdown in the lead up to the EU Summit at the end of the week. Merkel seems unlikely to relent in terms of debt sharing. It seems unbelievable that the Germans would even consider assuming the debt of bankrupt member nations.

The Greeks are beset with further problems as the Finance Minister resigned and health problems plague the new PM. It seems likely they will prepare a case for easing austerity measures but nothing short of full debt retirement will sustain membership. The Greeks are terminal as Cyprus joined member nations who have requested a bailout.

Expectations remain low and feed market negativity towards Europe which will impact the US and Asia. The EUR dropped below 1.2500 and the GBP 1.5550. Risk aversion is on the wane as safety plays push the USD higher.

Commodities were hit hard, as were equities. The aversion play pushed the AUD below parity and the KIWI back to 0.7850. In the US, sentiment tanked despite some positive Jobs data. New Home Sales leaped 7.6% surprising many.

The Dallas Fed's Manufacturing Index popped up 5.8 although the Chicago Fed Index slipped. The positive economic data was outweighed by the European debt crises and pushed markets lower. European progress will determine market direction this week although some big Political decisions in the US may impact markets.

The Supreme Court are set to rule on Obamacare which is a decision impacting nearly 20% of the US market.

Collinson FX market Commentary: June 25, 2012

Markets experienced a 'Dead Cat Bounce' after the sell-off on Thursday. All problems remain and a solution does not seem near. Banks remain closely watched as their Balance Sheets remain enhanced by Central Banks and their P&L boosted by yield curve plays.

Further developments in Europe will remain the market determination. This week markets will also view economic data in the US, highlighted by Housing Data.

Europe will continue to dominate with the EUR looking weak trading 1.2550 and the GBP 1.5580. Commodities remain vulnerable despite higher yields as risk appetite fades.

The AUD may well test parity and the KIWI dips under 0.7900.

No major events are scripted but Eco-Political events remain key.

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