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Collinson FX Market Commentary- September 27, 2012 - Europe's on brink

by Collinson FX on 27 Sep 2012
Image of the Day Day 4 - SB20 European Championships 2012 Alan Hillman & Katie Ashworth/Sportsboat World

Collinson FX market Commentary: September 27 2012

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Europe again seems to be on the brink, with riots in the streets of Greece and Spanish civil upheaval. The drug addicts are rising up with the threat of reduced or cancellation of their fix. It appears that the socialist nations have built a dependency on the state which has been funded by debt and has now overwhelmed their domestic economies and is about to overwhelm the EC!

The expansion of the Money Supply, through printing more EUROs, has taken the ECB balance sheet beyond ridiculous and destroyed wealth. There is no further option and Super Mario has gone all in! Risk aversion has now tipped the balance and despite QE Infintiy, the Dollar has risen with the EUR dropping to 1.2850 and the GBP 1.6150. The crises in Europe is in a death spiral with Politicians unable to solve the problems due to lack of national support. They need to balance budgets and attack the debt but the citizens have become dependent on the Government who does not generate any income.

Austerity has resulted in civil disobedience which now acts as a deterrent to fiscal action. In the US, New Home Sales disappointed falling 0.3% popping the wave of optimism in the Housing sector. Commodities drifted lower and risk aversion hit the AUD which dropped to 1.0350.

The poorer cousin continues to hold above 0.8200 defying gravity and enjoying relative gains despite the fall in risk appetite. Europe is driving the fear markets are experiencing as confidence in Monetary solutions wain and leaders fail. We need a quantum change politically and this must start with the worlds largest economy!


Collinson FX market Commentary: September 26 2012

ECB President, Draghi, met with German Chancellor, Merkel, today and promoted the ECB Bond Buying Bailout plan as a sucess pointing to the relative stability experienced recently.

The worries still remain as fundamentally all they have achieved is a temporary reprieve in the form of lower short term interest rates. The fundamental crises not only remains but grows with individual nations deficits. Spain remains under pressure with protests and civil upheaval sparked by the introduction of further austerity measures. IMF President advises a write-off of unmanageable Greek debt setting a wonderful blueprint for other trouble member nations. Unsustainable deficits lead to unsustainable debt. Solution:Lend more money and artificially lower rates through monetary intervention to allow sustainability.

Debt continues to rise as deficits remain so write off the debt! Absolute lunacy! In the US, markets drifted lower after some uncomplimentary comments from Philly Fed Chairman Plosser. Plosser advises that QE Infinity will atificially lower short term interest rates and do little to lower long term rates. It will not, therefore, do much to boost growth or employment.

A fail from Plosser does little for the Fed's credibility!.The EUR dropped below 1.2900 with the news although stronger economic data pushed the single currency above the big figure. S&P Home Prices rose for the seventh straight month and Consumer Confidence hit a new high propelled by QE3.

Commodities tread water supported by a weak Dollar but undermined by risk appetite.The AUD held 1.0400 and the KIWI moved to .8240 showing some local support after a slow start to the week. Europe will remain the focus with US economic data driving sideway market direction.

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