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Collinson FX Market Commentary- November 29, 2012 - Market windshifts

by Collinson FX on 29 Nov 2012
Image of the Day Vendee Globe - Macif skipper Francois Gabart (FRA) Vincent Curutchet / DPPI / Vendée Globe ©

Collinson FX market Commentary: November 29, 2012

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Markets now move depending on the way the wind is blowing in relation to the EU crises and Fiscal Cliff negotiations.
Equities were lower earlier after doubts regarding the Greek solution started to emerge in the media. Reports that Greek debt holders would again be required to take debt write-offs undermining the new deal and future solutions.

The EC look set to provide EUR$40 Billion to bail-out the nationalised Spanish Banks relieving some pressures. Markets turned positive after Obama indicated a deal would be done prior to Christmas to avert the Fiscal Cliff. House Leader Boehner was also in a positive frame of mind with revenue on the table under the proviso of no rate rises. This will probably remain the determinant of market direction until a deal is struck.

New Home Sales in the US fell 0.3% and Weekly Mortgage Applications dropped 0.9% contradicted the Home Price Index numbers yesterday. The Biege Book will be released today and will probably show what it always does. Weak growth and a slow recovery!

The EUR traded 1.2930 and the GBP 1.6000 unchanged as economic news was countered by sentiment.

Commodities remain steady with the AUD 1.0475 and the KIWI 0.8233 as confidence returns and demand rises. Political developments will continue to dominate market direction.


Collinson FX market Commentary: November 28, 2012
Good news from Europe where a deal was reached over the Greek debt crises. No solution but a postponement of the problem allowing the EU time for an economic recovery. The agreement cuts interest rates on outstanding debt, defers payment of said interest payments and extends the maturities of the debt.

To put this in to perspective the EU and IMF have basically waved the cost of the debt for the forseeable future thereby alleviating the pressure on Greece all the while adding to that debt by extending further loans to enable the state to run.

The next step will be to write-off that debt which would be the last measure and detroy what little credibility the EU/IMF have. Now they will look to addressing the crises in Spain and Italy who will demand similar terms under precedence.

Unlimited cost free funding which can only be funded by monetary expansion triggering inflationary pressures which will destroy the single currency and mortally wound the EC.

Political ill-will and procrastination drives Europe to a far bigger cliff than the US face. The EUR traded 1.2935 with the GBP 1.6020 looking vulnerable. In the US, talks around Fiscal Cliff negotiations appear to be heading in the wrong direction with growing pressure from Democrats to ignore fiscal cuts and extend taxes.

The left seems committed to driving America into Socialism and dependency which will lead to destruction as it had in Europe.

The Case Shiller Home Price Index rose again offering some good news with a rise in Consumer Confidence boosting hopes, although durable good orders were flat.

The AUD held 1.0450 and the KIWI 0.8200 but the looming crises in the US adds to downward pressures.


Collinson FX market Commentary: November 27, 2012

Stocks opened the new week in the US lower with growing doubts about evasion of the fiscal cliff. Politicians are toying with the fiscal cliff with many seeing tax rises and cuts to defense as more than just palatable, attractive even.

Democrats are expected to be divided over this and a grand coalition of post-election euphoria is disappointing quickly. Obama may hobble an agreement but taxes will rise and entitlement spending will continue to spiral out of control. In Europe, EU members failed to agree on the new seven year budget but all managed some successful photo opportunities. EU Finance Ministers gathered to approve the release of the next tranche of the Greek Bailout.

Debt has overwhelmed the country with GDP contracting thus preventing the servicing of existing debt at discount interest rates. The next step will be an interest rate moratorium followed by debt write downs. This is a broken state and the continued support is untenable but preferable to the collapse of the single currency. The EUR trades below 1.3000 while the GBP holds 1.6000. In the US the Dallas Fed's Manufacturing Activity Index contracted 2.8 and the Chicago Feds Activity Index also fell 0.56.

Economic data will not be great short term and Political procrastination should ensure a return to global recession by the new year. Doha Global Climate Change should sort out the Earths warming by taxing the richer nations providing some relief. It is working well in Australia with the largest global Carbon Tax reducing temperatures to sooth the populace!

Commodities remain steady with the AUD holding above 1.0400 and the KIWI just under 0.8200.

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