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Collinson FX Market Commentary- September 14, 2012 - Bernanke acts

by Collinson FX on 14 Sep 2012
Image of the day "We’re OK, they are clear astern! " ETNZ’s AC 72 takes aim at one of the Friday night racers on Auckland’s Waitemata harbour © Richard Gladwell www.richardgladwell.com

Collinson FX market Commentary: September 14 2012

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Bernanke finally acted as promised/threatened to do!?

He has announced a open ended purchase of Mortgage Debt of $40 Billion/month to counter weak economic data especially unemployment. Bernanke downgraded forecasts for GDP growth in 2012 while revising 2013 and 2014 upwards. No doubt the far date forecasts will be reviewed lower if the economic stagnation continues. The QE3 has surprised many with the Presidential elections around the corner as this could be construed as partisan especially since Romney has expressed support for a strong Dollar and the pink slip for Bernanke!

Equity markets broke through technical levels testing 2007 highs on a sugar boost. Economic conditions are slowing with a recession gripping Europe and impacting Asia and the US so this is hardly good news. The EUR rallied to test the 1.3000 levels with the GBP reaching 1.6150. Commodities surged with the news as the USD is undermined.

The associated currencies benfit with the breaking AUD 1.0500 and the KIWI testing 0.8300. Bernanke denies inflationary pressures due to the lack of growth but long term this will be the genie released from the bottle.

The strength of the once mighty Dollar now relies on a Republican victory in November and the dismissal of Bernanke and fiscal responsibility from the Government!



Collinson FX market Commentary: September 13 2012

Little action ahead of the FOMC meeting tonight with markets stalled.

In Europe Germany approved the ESM bail-out package giving the green light to Super-Mario! Economic indicators point to recession with the added threat of rising inflation which makes for a nasty recipe for disaster.

The EUR continued to gain with risk appetite to 1.2900 and the GBP 1.6100. The US awaits the FOMC statement tonight and reacts to their ambassador to Libya being killed.

This will be a test for Obama as the elections draw closer and the people will expect more than an apology. Risk appetite pushed the AUD to break 1.0500 but dipped as markets flatline.

The KIWI threatens 0.8200 and these levels are technical highs which may prove to be too big a mountain to conquer.

Collinson FX market Commentary: September 12 2012

Good news is bad news and bad news is good! It is a wonderful world of make believe seemingly infantile in the nature. Bad economic news brings the prospect of further Central Bank intervention and thus further liquidity slushing around an already flooded economy.

The news from the US has been weak and deteriorating and yet risk appetite is on the rise with the prospect of QE3. Equities are now trading at 2007, 5 year highs on the sugar high of monetary stimulus.

Fundamentals are dreadful and something must give... besides the US$! German Courts look set to sanction the ECB's Bond Bailout package which gave momentum to equities and currencies.

The EUR rose to 1.2860 and the GBP 1.6075. China has endorced the projected growth rate of 7.5% giving confidence to commodity markets and boosting the AUD back to 1.0450.

The KIWI also booked gains rising to test 0.8200 with further rises in the local Real Estate market as House Prices surge. Moody's have indicated the AAA status of the USA may be under threat unless they address the spiralling Debt/GDP ratio.

This had little effect of market confidence as the addicts look to the Fed for further assistance Thursday!

Collinson FX market Commentary: September 11 2012

Economic data continued to disappoint markets with Asia leading the way. China disappointed with trade weakening and the Chinese stimulus is an attempt to address this through a domestic replacement. Chinese Industrial Production has also slowed with inflationary pressures growing. Japan GDP suffered from weaker trade numbers and now the two biggest economies in Asia are reflecting the recessionary nature of the global economy.

The Bond-Bailout package has drawn a line under debt costs for imperiled nations allowing some space but done nothing the address the cause. This week will focus closely on the German Courts and their preference to support the ECB bailout. The decision will come ahead of a meeting of the 'Troika' of the ECB, EC and IMF. Another headliner from Europe is the elections in the Netherlands which should reflect the reluctance of the people to support the EU and the bailouts.

The US has taken the new measures in Europe and bought risk with the USD falling and equities rallying strongly. Markets will watch Europe and the FOMC rate decision. The EUR remains well supported at 1.2750 and the GBP trading around 1.6000. US markets are now relying on QE and Central Bank intervention as economic conditions deteriorate.

The AUD remains well bid trading 1.0330 and the KIWI dropping under 0.8100.

NZ Trade data confirms the global contraction as does yesterdays fall in Manufacturing. The RBNZ will announce their plan of action which will be nothing as usual. They should cut rates and provide stimulus in an effort to boost the domestic market and counter the unrivaled liquidity in Asia, Europe and the US!

The Reserve Bank will be wary with the boom in the housing market taking advantage of low interest rates. House Sales rose 16.2% and House Prices 1.3 for the last month. Low interest rates are one part of the perfect storm. Demand has risen with limited supply as building costs have skyrocketed over the previous decade.

Auckland has led the way and has now risen above pre-GFC levels and presents a problem to authorities.

Equities are looking nervous and any major moves will impacts currencies and commodities.


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