Collinson FX Market Commentary- June 29, 2012 - A double blow
by Collinson FX on 29 Jun 2012
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Collinson FX market Commentary: June 29, 2012
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Obamacare passes in the US dominating headlines and overshadowing the EU summit. The news from the US was great politically for Obama and the Democrats but not great for the US economy. The bottom line impact will be immence as they are effectively adding 50 Million people to the health system.
This will cost an estimated US$2 Trillion at a time when they are running record deficits and a record debt. This has the potential to be last straw breaking the camels back! The DOW dropped, wiping out the previous two days of gains. The economic news largely ignored with the GDP coming in at the expected 1.9%. In Europe the EU Summit dealt with the business of the Cypriot Bailout, the Spanish Bank bailout and other pressing issues. They are looking at possibilities around funding mechanisms from which to fund these bailouts.
Merkel has urged members to look at long-term fundamental Fiscal/Political reform rather than immediate emergency problems faced by Italy, Spain and Greece. This does not bode well for solutions and consequential impacts on the markets.
Risk appetite fell sharply and the EUR dropped to 1.2420. Risk aversion has spread to the commodity currencies with the AUD testing parity on the downside and the KIWI back to 0.7850. It is hard to be a bull in these uncertain times with economic data now deteriorating in terms of GDP, Employment and Confidence.
Collinson FX market Commentary: June 28, 2012
The EU Summit begins tonight in Europe with expectations low. Equity markets continued to rally despite the looming summit which should provide further leadership failures.
Not surprisingly Italy, Spain and France are advocating socialised debt but Germany will steadfastly refuse. Merkel would be committing political suicide to approve a Eurobond shared debt scheme. The EUR drifted lower in anticipation trading 1.2450 and the GBP 1.5560.
The US markets ignored Europe without any major developments and focused on improving economic data. The Housing Market continued to surprise with Pending Home Sales rising 5.9% complimenting the Case-Shiller Home Price rises from yesterday. US durable Goods Orders also rose further boosting confidence and supporting the rally in equities and commodities.
The AUD held on to gains trading 1.0075 and the KIWI around .7900 after some improving trade data. The EU Summit will dominate markets with only the brave being long.
The big news out of the US, will be the Supreme Court ruling on Obamacare tonight. If they reject the unpopular law, markets would probably rally strongly.
Collinson FX market Commentary: June 27, 2012
EU proposals for the summit have been bagged by the Germans after their release. The proposals included 'Common Banking Supervision' and 'Joint Debt Issuance' which are euphemisms for socialising the debt. The Europeans cannot seem to help themselves with the solutions doubling down.
It is socialism that is the root of all their problems. Providing citizens according to their perceived needs rather than economic reality. The bloated pension funds and distorted socialised laws are endemic of the corrupted and disfunctional socities littering the EU. The new proposals would provide temporary solace for Med members but would drag functional members down with the sinking ship. How about balancing the budgets for an idea? The EUR traded around 1.2500 and looks vulnerable to hits from a failed EU summit.
Moody's downgraded 28 Spanish Banks and look set to downgrade Spanish Sovereign Debt to Junk status but markets are starting to become immune. In the US equity markets ignored the Euro-quakes and rallied. The market focused on surprisingly positive housing news. The S&P Case-Shiller Home Price Index rose, sewing seeds of a housing recovery essential to any economic turnaround in the US.
Rising risk appetite floated the commodity currencies with the AUD consolidating above parity with the KIWI moving above 0.7900. A test of 0.8000 would be a bridge too far in this market but stranger things have happened!
Consumer Confidence remains a problem in these markets and thus any sustained rally is unlikely.
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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