Collinson FX Market Commentary- September 20, 2012 - Japan buys bonds
by Collinson FX on 20 Sep 2012
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Collinson FX market Commentary: September 20 2012
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The Bank of Japan surprised the markets with an expansion of the bond buying program in an attempt to stimulate the economy and counter QE3.
The expansion of Bond buying increases liquidity and attempts to protect the JPY and the export markets. This confounds common sense as to why the RBA and RBNZ continue to maintain the differential in interest rates and domestic liquidity. The result is to support higher rates and currencies killing trade exposed industries such as exporters and tourism.
The AUD approached 1.0500 again despite testing local conditions and the KIWI remains strong, testing 0.8300. Equity markets remain strong with risk appetite buoyant from the monetary supply. In the US, the housing market received some positive news in the form of existing home sales. They rose 7.8% and Housing starts also gained 2.3%.
The prospect of a bottom in this market is possible although building permits declined 1% and weekly mortgage applications fell despite growing refinancing demand.
The EUR held 1.3050 and the GBP trades strongly at 1.6225 with no major eco-political events driving financial markets.
Local NZ markets will look at the state of the economy today with NZ GDP to be released. Central Banks seem to be the only game in town with Political leaders reticent to act fiscally as they were elected to do!
Collinson FX market Commentary: September 19 2012
Market fears rose with doubts over the European debt recovery program and its ability to solve the crises. The Spanish have indicated that they will consider a bailout if conditions are acceptable.
The EUR slipped back to trade 1.3035 with the new rising headwinds. The GBP continued to gather strength to 1.6250 insulated from the single currency woes. The important ZEW Economic Sentiment report showed Germany improving but from a record low base and still remains negative.
In the US, markets traded sideways with many expecting this holding pattern until the November elections. The NAHB House Market Index rose to 6 year highs to 40 from 37. The housing market has rallied with equities after Bernankes infusion of further liquidity to the market.
The state of equites is trading at 2007 levels with risk appetite strong although these levels are scary and you must be brave to be long. Economic data will be the driver although political events will gather in impact the closer to the Presidential elections.
Europe will remain a great determinant and this will be driven by the success of the Bailouts!
Commodities drifted from highs pulling the AUD back to 1.0440 although the KIWI remains bid on 0.8260.
Collinson FX market Commentary: September 18 2012
The fallout from QE3 remains with the equity markets showing risk appetite.
The positive news from the equity markets are not reflected in our quantum which we call reality. The deficits remain crippling and debt levels have reached tipping point, so why have the markets decided to invest in equities. Bernanke has decided that corrupted Keynesian economics will keep his job as he pins his hopes on the biggest spending President of all time!
The world needs a quantum shift and address the welfare/beneficiary system robbing productive society to support largesse.
The EUR moved to 1.3100 after all the Central Bank corruption of the Dollar and the GBP moved to 1.6250. Commodities have found support with the reserve currency demise although the AUD struggles at 1.0465.
Questions must be asked as to the relative weakness despite the concerted effort to undermine the reserve currency.
The KIWI trades 0.8250 and shows some support though fundamentals point to a terrible readjustment.
Re-election of the Obama democratic regime could spell the end of western capitalism and with it the hopes of future generations!
Collinson FX market Commentary: September 17 2012
Equities continued to rally on the back of Bernanke's nuclear option. The release of the new QE3 allowing the Fed to buy $40 Billion/month for eternity has sent equity markets into a buying frenzy crashing through technical tops.
The overhwelming response is natural considering the promise of an endless supply of cheap money. The rally continued with some positive data assisting markets. University of Michigan Consumer Sentiment rose as did Retail Sales endorcing the rise in risk sentiment. Egan-Jones downgraded the US from AA to AA- but this failed to raise any fears. Manufacturing and Industrial Production in the US both slipped confirming the state of the US economy and exemplifying the reason for central bank interference.
The USD has been understandably trashed as the Fed washes away the value of the once mighty Dollar. The EUR rallied to 1.3115 and the GBP 1.6215. Rumours abound that a pending EU$300 Billion bailout of Spain is being considered by the Troika. The EC,ECB and the IMF would not discourage the bailout considering the contingency mechanisms they now have in place.
Commodities rallied as the USD faultered boosting the AUD to 1.0540 and the NZD to 0.8275. This week will closely monitor activity in the Eurozone with US economic data featuring Housing and Manufacturing.
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