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Collinson FX Market Commentary- October 11, 2013 - Surge ahead of Deal

by Collinson FX on 11 Oct 2013
Wanaka - San Francisco 18ft International - Day 3, 11 September 2013 © Richard Gladwell www.richardgladwell.com

Collinson FX market Commentary: October 11, 2013

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US Equities surged overnight with the prospect of a deal on Capitol Hill. Talk is that the Republicans are ready to extend debt ceiling limits and postpone any stand-off. Caving, will embrace the markets, as equities surged but long-term problems remain. Currencies remained relatively unaffected with the EUR trading 1.3540 and the GBP 1.5975. Currencies and Bonds remain an impartial litmus on this political hyperbole.

Central Bank remain the conduit and their intentions are clear, globally! Keep the pump primed and flood markets with liquidity! Yellen will continue to print money, with gay abandon, because her socialist principles guide her towards the humanitarian Keynesian abyss, with no regard for Monetary rectitude. Risk currencies booked gains with the AUD hitting 0.9450 although the KIWI still struggled below 0.8300.

Markets are controlled by the Political impasse and Republicans look set to cave to Obama and equity markets surged. Democrats have seemingly won the game of chicken but their will be a huge political price to pay for this surrender!


Collinson FX market Commentary: October 10, 2013
Obama announced the appointment of the new Fed Chairman overnight and this overshadowed the growing crises over the Debt Ceiling/Government shutdown. The new Federal Reserve chairman is Janet Yellen and is the first female appointment. She is an academic and a dove, but significantly, second choice of the Administration.

The immediate effect on the market was to reverse the steady decline in equities, as she is seem as a dove on monetary policy and is likely to extend tapering, thus expanding bond purchases and increasing liquidity. Ordinarily this would adversely impact the Dollar but the prospects of a political deal has seen the EUR retrace back to 1.3510 and the GBP break the big figure to the downside just around 1.6000. Commodities remained mixed and the associated currencies were steady with the AUD 0.9430 and the KIWI consolidating below 0.8300.

Fed minute releases revealed most members expected tapering to begin this year and to be completed by mid-2014. Failure to act was seen as a challenge to credibility but this was ignored, as slowing economic data, pushed them to err on the side of status-quo. The Fed's actions have been to counter the grossly irresponsible fiscal policy, but Yellen's politics are partisan and will denigrate the office by her appointment.

The debt debate will continue to drive markets with developments dictating direction!


Collinson FX market Commentary: October 9, 2013
Markets are transfixed with the Government shutdown and the Debt Ceiling impasse. This is a growing crises and will impact on global economies.

This happened a couple of years ago and resulted in a big hit to global markets led by equities. The US had their credit rating downgraded, despite the aversion of default. It appears that both sides are not prepared to negotiate and a crises is imminent.

Equities continued to bleed although currencies remain virtually unaffected with the EUR trading at 1.3575 and the GBP 1.6080. European economic conditions seem to be slowing and this has not been improved by the prospects in the US with default on the cards.

Commodity prices also remained mixed with the AUD holding 0.9400 but the KIWI slipping below 0.8300. It appears most directional pulls come from Political negotiations in the US and the failure of the Government negotiate a compromise.

Brinkmanship and last minute deals are a probable outcome, but damage can be done in the meantime!


Collinson FX market Commentary: October 8, 2013

The US Government partial shutdown and the looming debt ceiling expiry continued to dominate market direction.

An impasse has grown between the Republican House and the Democratic Presidency and Senate. The Republicans have been forced into a corner and do not want to capitulate and the Democrats want to force their position of strength. The problem only becomes more serious when the Debt Limit is reached mid October. It is hard to see a compromise without a capitulation and the Tories appear the more likely. The disruption to markets come with the uncertainty and this has been hitting equities hard in a month renown for major equity adjustments.

The USD was steady with the EUR trading 1.3575 and the GBP 1.6085. Commodities were mixed and the AUD traded 0.9435 while much of the Country was closed for Labour Day. The KIWI also experienced light trading and held near 0.8300. Watch US and European bonds for signals of danger during these political negotiations as this will reflect the danger levels in the markets.

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