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Collinson FX Market Commentary- October 17, 2012 - Markets rally

by Collinson FX on 17 Oct 2012
Image of the Day Emirates Team New Zealand. Day 12 of testing for the team’s first AC72. Chris Cameron/ETNZ© http://www.chriscameron.co.nz

Collinson FX market Commentary: October 17, 2012

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Markets continued to rally strongly eliminating last weeks losses with a surge in risk appetite. The conception was sparked in Europe with word of a Spanish request for a bailout while Portuguese riot in the streets against austerity measures required from their own bailout!

The German ZEW Economic Sentiment reported an improvement but still sits at minus 11.5. Corporate earnings continued to drive equities north lead by the financials. Citibank rallied after CEO, Pandit, resigned much to the relief of many.

CPI was released in Europe, US and NZ and was benign despite huge rises in cost of living because of the lack in growth. Industrial and Manufacturing Production both increased in the US contradicting previous data and thus added impetus to the rally in equities.

Commodities were mixed despite the strong rally and the AUD drifted to trade 1.0265. NZD was hit with surprising news on inflation which fell to 0.8%. The lack of growth allows speculation that RBNZ will cut rates thus reducing pressures on the currency which fell to 0.8130.


Collinson FX market Commentary: October 16, 2012

The markets opened the week stronger putting a week of losses behind and looking at strong economic data and corporate earnings. Chinese CPI slowed as did the PPI which lowered input costs and eased monetary pressures. Exports from China doubled beating expectations and weakening recent trade data.

In Europe, the German Finance Minister refuted a Greek default and espoused the harm of an exit on the EU family. In the US, Retail Sales leapt 1.1% beating expectations and giving risk appetite a boost. This was tempered by the Empire State Manufacturing survey which contracted for the third straight month. The EUR held steady at 1.2940 and the GBP 1.6070.

The weak Manufacturing data hit commodities falling uniformly. The immediate impact on the associated currencies was tempered by the strong data from China. The AUD held 1.0250 and the KIWI 0.8180 with rising Home Loans and Car Sales reflecting a recovery in these major sectors after RBA easing policies beginning to impact. Corporate earnings have been strong, lead by Financials with Citi beating expectations with a free pass from Bond Yield returns.

Look for developments from Europe and economic data and corporate earnings to drive market sentiment in the US. Election fever is rising in the US and the gains by Romney are a positive for markets with Obama ineptitude well and truely exposed.

The second debate tonight may well cement the rise of conservatives with the 'Great Orator' unable to combat mortal questioning!

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