Collinson FX Market Commentary- October 3, 2012 - Oz Bank chops rate
by Collinson FX on 3 Oct 2012
Image of the Day
Collinson FX market Commentary: October 3, 2012
http://itunes.apple.com/app/collinsonfx/id533360650?mt=8!Click_here to find out how to get CollinsonFX's free iPhone app
HISPANIA - Les Voiles de Saint-Tropez © Rolex / Carlo Borlenghi http://www.carloborlenghi.net
The RBA surprised economic pundits by cutting rates from 3.50 to 3.25%. Calls from across the struggling economy were heard as economic conditions have deteriorated accentuated by the decline in mining prices and thus revenues.
The RBA also recognised the relative uncompetitiveness the AUD has had on trade exposed sectors including Manufacturing, Tourism etc. The cut in rates hit the AUD, which has fallen a cent to 1.0265, and weakened against crossrates improving export conditions being eroded by moves from Central Banks from the US to Europe.
The cut reflected weakening Global Economic conditions and the refusal of the Spanish to accept a bailout pushing equities lower. In the US this was not swallowed well and the boost received from yesterdays Manufacturing data was not enough to ignore the fundamentals which point to a global recession including the US.
The US is now firmly in election mode with the fiscal cliff likely to spawn fear in investors hearts and wallets. Four more years of economic stagnation may be a great reason to boot out the architect of European Socialism in America!
The KIWI held strongly, despite moves across the Tasman, with the NZD holding 0.8275 and gaining against the AUD moving to 0.8050(1.2400!).
Collinson FX market Commentary: October 2, 2012
Equity markets rallied strongly for the new quarter in Europe and the US. European markets received a boost with the Spanish Banks 'passing a stress test' thus enabling Moodys to relent on a downgrade. The risk aversion subsided and equity markets pushed north .
The positive start spread from Europe to the US and was super charged by the Manufacturing data. The ISM Manufacturing Index broke into expansionary territory rising to 51.5 from 49.6 defying recent regional manufacturing reports. Ben Bernanke appeared and reinforced QE infinity extolling it's virtues,. The argument is cheap money will boost investment in housing, equities, business etc, creating greater wealth thus boosting consumption. It has worked superbly well for the last few years in destroying real wealth as the USD slides in relative terms!
The boost to Housing from previous QE has been negligible and this continues to weigh on the economy with construction spending falling for the seventh straight month to -0.6%!
A surge in equities was not reflected in the risk currencies with the AUD holding 1.0375 and the KIWI just below 0.8300. Gold remains popular with the erosion of currencies through Central Bank stimulus.
Central Banks will be watched closely this week with rate decisions across the globe led by the RBA today. The RBA is not expected to cut rates, in surveys of economists, but many believe there is scope for action with low inflation and flagging growth. A surprise cut may well hit the currency!
For more on Collinson FX and market information see:
www.collinsonfx.com and www.collinsonwealthmanagement.com
Countries: | NZ: 0800 338 838 | AU: 1800 143 415 | NY: 1888 6257 833 | UK: 0800 0285 834 |
Disclaimer: The details expressed in this website and accompanying documents or transmissions are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Collinson Forex Ltd accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.