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Collinson FX Market Commentary- November 1, 2013 - Markets positive

by Collinson FX on 2 Nov 2013
Stealth Mission just before breaking her rig - Start of Coastal Classic 2013, Waitemata Harbour, October 25, 2013 © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: November 1, 2013

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The markets shook off early losses and turned positive after some stronger manufacturing news from the US. The Chicago PMI rose to 65.9 from 55.7 giving some confidence to a slowly improving sector. The Dollar also showed some signs of life, after a more hawkish statement from the Fed than has been the case in recent times.

The exit from QE would see a return to a fundamental driven market but tapering has been proposed and ignored for too long. The Dollar found some support, with the EUR plunging to below 1.3600 and the GBP back to 1.6050 after EU Employment data remained terrible, at 12.2% Unemployment!

The AUD slipped, but was marginally better with Building Approvals surging 14.4% for the month and 18.6% for the year. The AUD traded 0.9445 although the KIWI slipped back to 0.8240. The RBNZ left rates unchanged and signaled an extended period of low interest rates as housing settles. This reverses recent strongly hawkish tones with imminent rises promised by Governor Wheeler. Markets will continue to be driven by Central bank activity and commentary.


Collinson FX market Commentary: October 31, 2013
The Fed observed 'improved economic activity' but maintained the unprecedented stimulus! This did not instill confidence in markets. Housing is improving, but not to the extent the Federal Reserve requires, to cut the extra-ordinary injections of liquidity.

The weakness of the economy is obvious to most, but bad news remains good. With record low interest rates investment in housing should be spiralling upwards and out of control, as it is in pockets of economic freedom (i.e.NZ and parts of Australia), but it is not. This would require confidence in investment, which does not exist! The Dollar continues to recover with the EUR trading 1.3725 and the GBP slipping back to 1.6020. Bonds remain static, so there is no sign of panic yet, but this is where the warning signs will come from.

Commodities remain steady but the associated currencies continue to decline, with the AUD dropping to 0.9470 and the KIWI 0.8230 ahead of RBNZ statement at 9.00 am NZT this morning. Risk is the issue, with these currencies and appetite on the wane. No surprises from the Fed but the hard-line Monetary Policy is an indictment of the parlous state of the US economy. This has created a balloon in equities that must pop rather than deflate.

Currencies will not be immune and the weakness in the Dollar will continue until the white hot printing presses in the US are controlled.


Collinson FX market Commentary: October 30, 2013
The days of economic fundamentals driving the markets are long gone, now the Fed has introduced their new economic regime of Monetary Expansionism. The unprecedented period of duplicity by the Fed has created a new monetary utopia and damn the consequences! This is the new reality....'good news is good news and bad news is good news!'.

The Fed meets today with the outcome announced tonight, with the likely full extension of QE infinity with the possibility of an expansion. The equity bubble has continued to stretch, with no prospect of a let up in the flood of liquidity. The only threat is a reality prick which may cause panic in equity, currency and commodity markets. The trigger for this will be reflected in the Bond market so any spike in US 10 year bonds will be the canary in the mine.

Equities again surged with the news that Consumer Confidence fell by the most in 2 years and Retail Sales contracting 0.1%!? S&P Home Prices rose 0.93% to 12.83%, some good news to a faltering economy.

The Dollar rebounded, with the EUR slipping to 1.3750 and the GBP 1.6030. Risk currencies reflected some of nervous reality, with the AUD dropping to 0.945 and the KIWI drifting to 0.8250. All eyes remain on the Fed's announcement tonight.


Collinson FX market Commentary: October 29, 2013

The Fed meets for two days tonight and the outcome will be keenly awaited with Central Bank stimulus the main driver of equity bubbles.

Some have suggested that the weak economic data may prevent the introduction of Fed tapering but now a few are suggested enhanced monetary stimulus!

The 'all in' monetary policy would also be attractive to the doves of which nominee, Yellen, is certainly one. US Industrial and Manufacturing Production was mixed and the Dallas Fed Activity reported a decline in activity. Exisiting Home Sales also declined, by a further 5.6%,providing further evidence of a softness in the housing market despite record low interest rates.

The Dollar stabilised momentarily, with the EUR trading below 1.3800 and the GBP 1.6150. Risk currencies were steady with the AUD 0.9550 and the KIWI trading just below 0.8300. All eyes will be on the Fed and other Central bank activity, including the mighty RBNZ, which may offer a surprise!


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