Collinson FX Market Commentary- March 7, 2013 - KIWI drifts back
by Collinson FX on 7 Mar 2013
Collinson FX market Commentary: March 7, 2013
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The EUR fell below 1.3000 after EU GDP numbers confirmed a creeping recession. EU GDP contracted 0.6% for the quarter confirming what most had expected. Expansive Monetary Policy has failed to deliver the stimulus required to drive growth which must be a huge concern to European leaders and Asian markets who supply the Eurozone.
The massive expansion of the ECB's balance sheet has failed to ignite the economy and only served to keep interest rates in check to enable member nations to service their debt. The overwhelming problem of deficit/debt continues to grow and takes on a more critical importance when growth contracts. Watch individual Bond rates as the canary in the mine shaft! In the US, the Dow continues to embrace virgin territory and knows no bounds. The ADP Jobs report revealed 198,000 more jobs were added in the private sector beating expectations and boding well for the all-important Non-Farm Payrolls, Friday.
The Biege Book revealed a recovery in the US economic sectors lead by housing. Most growth terms were used in conjunction with terms such as 'moderate, modest and slow' reflecting the impact of regulation on the recovery. The behemoth of Government is growing and this is being measured in terms of regulation that is clogging up the economy and a major reason for the retarded recovery. Markets await the ECB and Bank of England rate decisions and fear comments from Governors.
The huge burst in Equity confidence in the US has not spread to the risk currencies with the AUD falling back to 1.0230 with political turmoil engulfing the country as the Victorian Premier is forced to resign and rumblings in Croc Territory! The KIWI drifted back below 0.8300 with little happening on the domestic front. Central banks and Non Farm Payrolls will be a focus for the rest of the week although Geo-Political issues could effect certain regions.
Collinson FX market Commentary: March 6, 2013
The chains have been broken on equities after the DOW surged past the previous all-time 2007 high. The rally is now approaching 10% for the year after 13% last year fueled by Central bank expansion in the extreme. It is hard to see this enormous rally not overstepping and the fundamentals do not support the massive gains thus a substantial correction is nigh.
The ISM Non-manufacturing Index sparked this specific rally in the US after European markets found faith after EU Finance Ministers agreed to a Bailout for Cyprus. Earlier Asian Markets lapped up Chinese predictions of continued growth around the 7.5% mark. The EUR was steady around 1.3040 and the GBP 1.5120. The RBA left rates unchanged which gave the AUD some impetus, rising to 1.0250. Retail Sales rose in Australia by 0.9% which was in line with RBA predictions of a recovery.
It does seem the RBA is talking things up as business and the Consumer remain bearish but they do hold further cuts up their sleeve if things continue to deteriorate. The KIWI continued to book gains as risk appetite rises moving up to 0.8300.
The headline is Equities and confidence but look for corrections supported by weakening economic data.
Collinson FX market Commentary: March 5, 2013
Markets remained flat after poor news from Asia and Europe failed to spook investors. A huge week of economic news was set with little action so the Bulls once again resumed the drivers seat. Asian markets were lower after China poured cold water on the housing market with new restrictions on mortgages and deposit requirements.
The Japanese have installed a dove into the Bank of Japan with a new mission of breaking the deflationary economy that has engulfed Japan for the last 20 years. His mission (should he choose to accept it) is to break the flatline and reinvigorate the Asian tiger!. It will take more than Kuroda, with his lax monetary policies, to reignite an economy with serious structural problems and an aging population. China looks to cool the housing bubble but a command economy must result in aberrations. The EUR flirted with 1.3000 again and looks set to challenge the downside.
The AUD has come under extreme pressures with global risk aversion and the local housing market dipping. Building Approvals fell, reversing expectations, and with it confidence. AUD dropped to 1.0100 and look set to test the big, big, big figure. The KIWI was not as volatile, although testing 0.8200, the currency settled at 0.8250.
A huge week of global economic data should frame the markets and expectations should not be high! Any rallies will be fermented in Central Bank Monetary Policy rather than positive economic realities.
Collinson FX market Commentary: March 4, 2013
The Dow closed out the week strongly just below the all-time high of 14.164 ignoring the gloom merchants calling the sequester deadline an apocalypse. Markets were full of confidence after some reasonable economic news and investors on the rise. European markets were mixed after Unemployment data confirmed another rise to 11.9% and inflation contracted confirming the parlous state of the single market.
The EUR hovered around the critical 1.3000 level and the GBP 1.5000 and these psychological 'big figures' may trigger a major move lower. This would need confirmation in terms of economic fundamentals but these will be forthcoming. In the US, Manufacturing rose, as did Consumer Confidence, which supported the bulls but this leg of the rally may come under a stern test this coming week. Markets will be focused on Central Bank rate decisions from the ECB, BoE, BOJ and the RBA which may not see any action but associated commentaries could drive market sentiment.
All important Jobs data in the US and the Fed's Beige Book will have impacts. A plethora of global economic data will drive markets as Technical traders look closely at critical support levels. The AUD remains weak trading just under 1.0200 and the RBA action and Economic reports will heavily impact what is some negative hits to the economy.
The KIWI held 0.8200 but will be impacted by risk aversion. This could be a huge week to begin 'March Madness!'
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