Please select your home edition
Edition
Collinson and Co

Collinson FX Market Commentary- September 8, 2012 - Risk appetite rise

by Collinson FX on 8 Sep 2012
Image of the Day Day 5 of the 2012 Paralympics at Portland - 24mR with Weymouth bay as the backdrop David Staley - IFDS ©

Collinson FX market Commentary: September 8 2012

http://itunes.apple.com/app/collinsonfx/id533360650?mt=8!Click_here to find out how to get CollinsonFX's free iPhone app

The rising risk appetite was reflected strongly in the currencies at the close of the week with the USD and JPY receding. The EUR rallied to 1.2800 and the GBP broke 1.6000. The higher yielding currencies were also major beneficiaries of the ECB moves to shore up Bonds thus supporting over-indebted nations.

The AUD looks set to test 1.0400 and the KIWI blew through 0.8100. The big news to close a tumultuous week was the Non-Farm Payroll report. The US economy added 96,000 jobs missing expectations although Unemployment dropped to 8.1% as job seekers declined.

This is a disappointing number at a particularly critical time in the US Presidential Election campaign. The irony is the increasing call for the Fed to intervene which will be revealed with the FOMC this week.

Bernanke would be tempted but may be misconstrued by political pundits. NZRBA will also announce a rate decision but the expectation for change is low.

Economic data release will go a long way to driving market direction this coming week.


Collinson FX market Commentary: September 7 2012
Super Mario (Mario Draghi, European Central Bank President) has come to the rescue in a dramatic fashion with the Bond-buying bail-out package. The 'Outright Monetary Transactions' has been unveiled to a rousing reception with a huge risk-on rally in equities after the markets were caught short and unprotected. The plan is as was telegraphed,sterilised unlimited purchase of 1-3 year bonds.

These bonds relinquish the preferred condition status as previous issues disadvantaged existing holders. This will achieve the ECB's short term goals by lowering participant member debt costs enabling them to service their blown out debt. It technically avoids default but is in effect a bailout for nations with central bank underwriting all short term Government issued bonds. It does nothing to address the deficits that caused the debt and continues to add to it!

The EUR rallied strongly above 1.2600 after the news and must be observed that was insignificant compared to the action taken. Technically this does not break ECB rules, as it operates on the secondary bond market, but this action is completely against the spirit or foresight of the foundation rules. The US equity markets surged toward post-GFC highs and now look to test 2007 record levels. In the US, the ISM Services reported an increase to 53.7 from 52.6.

The precursor to the NFP came in the form of the ADP and Challenger reports and both exceeded expectations. The ADP added 201,000 Private sector jobs beating market expectations. The Challenger Jobs Report also improved with lower job cuts expected. This bodes well for the Non-Farm Payrolls which is keenly viewed especially with the political timing of the Presidential election. This could hardly be more important given the state of the electoral race.

The AUD regained 1.0200 after the risk appetite moves triggered by Europe the headline Unemployment fell locally.

The KIWI moved strongly towards 0.8000 and does appear test this crucial level. The focus will turn to the all important employment number tonight with hope rising.


Collinson FX market Commentary: September 6 2012

Markets remained on edge after details of the ECB Bond-Buying program filters out to the market. It seems that Merkel has agreed to the unlimited purchase of Government member debt if it is short dated and is neutral to the Money Supply.

This would answer the critics of Monetary Policy expansion through running the printing machines and thus counter the inflationary argument. The unlimited nature of the proposal may overwhelm any intention to allow this sterilisation or sanitation policy. This program would drive short dated yields lower taking some pressure of funding of the overwhelming debt.

This supported the EUR which rallied above 1.2600. This measure does nothing to address the fundamental problem of the growing debt. Continued deficits add to the debt which has become unsustainable in Greece, Spain and Italy.

The can has been kicked down a very short, dead-end street!

US markets remained flat after the news from Europe which should have boosted equities and other risk assets. Productivity was the one glimmer of hope on the economic front rising 2.2%. This is great news but is a direct result of corporate America trimming cost to the maximum over the last few troubling years.

There is limited potential gains left in this economic area. Weekly Mortgage Applications fell a further 2.3% which highlights the state of the US housing market. The AUD has come under recent pressure falling below 1.0200 with a red arrow. GDP has started to faulter domestically and politically the Labor Government has expanded expenditure during a revenue decline.

The KIWI held around 0.7950 but also looks vulnerable in this market.

Markets will focus on the all important ECB announcement tonight and US Jobs Reports!


Collinson FX market Commentary: September 5 2012

US markets began trade for September after the long weekend on a negative note.

Manufacturing data dissappointed with the ISM Manufacturing contracting at its greatest rate in three years. The ISM dropped below the static rate of 50, which was expected, to 49.6. On top of this construction spending hit a new year low shrinking 0.9%. Many leading analysts are now expecting a substantial correction in equities over the next two months reversing recent gains.

The markets have almost reached pre-GFC levels without any substantial fundamental economic recovery. The stabilisation has been bed-rocked by Central Bank monetary intervention which is necessarily temporary with substantial long-term consequences.

In Europe Moody's has moved the EU zone to a 'negative outlook' and warned of downgrades to the main players, and previously sound members, of Germany, Netherlands and France. Expectations are high for the ECB meeting adding liquidity through an interest rate cut and the Bond-Buying program.

There is no unanimity on the Bond program or the mechanism for implementation. Germany is under huge pressure to bend from fellow members and the Obama regime who fear an implosion prior to November elections. The EUR traded below 1.2600 after early gains subsided as risk appetite fades.

The growing discontent has spread to commodity currencies with the AUD trading 1.0220 and the KIWI 0.7940.

The AUD remains under pressure with local economic data turning bad and Govt revenues contracting impacting the budget. The Current Account improved, but for the wrong reasons. Imports fell at a greater pace than exports reflecting the slump in consumer demand locally and global demand for exports. Markets will be focused on the ECB meeting and the all important Jobs reports in the US.


Collinson FX market Commentary: September 4, 2012

The markets in the US were closed for Labor Day so the focus was on Asia and Europe. Chinese Manufacturing PMI continued to deteriorate falling to 47.6 in a steady downward trend.

Markets remained steady as the prospect grows of Chinese monetary intervention. Growing global economic fallout from weakening conditions are now only supported by Central Bank intervention. Bernanke has indicated a penchant for action if conditions continue to weaken.

In Europe, the ECB meeting is expected to announce a much awaited Bond-Buying program to alleviate funding pressures on Italy and Spain. Questions from the Bundesbank have been supported by the German Economic Minister likening the program to a drug administered to the waiting addict! The EUR remained steady trading 1.2590 and the GBP 1.5900 after some improving Manufacturing data perhaps reflecting some light at the end of the UK tunnel.

The Chinese problems have spread to commodity driven Australia with the AUD slipping to 1.0250. The Commodity price index slipped as terms of trade weaken. Inflation spiked to 2.2% impacted by the Govt's new Carbon Tax and Retail Sales dropped 0.8% surprising analysts who were expecting a gain.

Job Advertisements fell 2.3% tempting the RBA to cut rates at today's meeting.

Most surveyed expect no action although some may be required in the near future.

The KIWI followed back to under 0.8000 with Central Bank intervention being the only positive globally. If the only good news is further money printing markets are in real trouble!

Collinson FX market Commentary: September 3, 2012

Jackson Hole came and went.

The anti-climax was palpable, although the prospect of QE remained with Bernanke continuing to promise an additional fix. The prospect was enough to break the weeks equity losses and sustain a rebound.

The European Bailout rumbled on with the Bond-Buying Bank Bailout set to be announced in the coming week. This will temporarily allow Spain and Italy to issue enough debt at a manageable rate with the ECB funding the issuance either directly or indirectly (allowing Banks to enrich themselves in the process!).

Funding further debt does not address the cause of the problem and that is the endless deficits! Draghi has promised to do 'whatever it takes' but this will not be enough. The EUR rebounded to 1.2580 with the prospect of more US Dollars in circulation.

The new week will be flooded with economic data in Europe and the US highlighted by crucial employment reports. Central bank decisions will also drive sentiment with the BofE, ECB, Bank of Canada, RBA all announcing. Expectations will be low, except for the ECB, but Draghi has built expectations in the Latin way.

KIWI broke back above 0.8000 and the AUD reached 1.0345.


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.

Collinson and Co

Related Articles

Collinson FX Market Commentary - Aug 16 - NZD rallies in expectation
The NZD has rallied back to 0.7200, with anticipated rises in the Dairy Auction result The JPY was steady, trading 101.20, while the GBP slipped back to 1.2875. The NZD has rallied back to 0.7200, with anticipated rises in the Dairy Auction result, while the AUD holds around 0.7670. Look for Central Bank commentary to drive market direction as weak economic data is the new norm.
Posted on 16 Aug
Collinson FX Market Commentary - Aug 12 - NZD slides
Equity markets fell from record highs to close the week after weaker than expected US Retail Sales. The NZD slipped back below 0.7200, while the AUD fell to 0.7650, both still supported by favourable interest rate differentials. The week ahead has plenty of ammunition on the economic data front, lead by CPI data, that will probably confirm weak global growth.
Posted on 13 Aug
Collinson FX Market Commentary - Aug 11 - RBNZ caught out again
The NZD trade around 0.7200, while the AUD tests 0.7700, again. The RBNZ was shocked after the dust settled. They cut rates, as expected, then verballed the currency lower.The markets saw the interest rate differential and acted.
Posted on 12 Aug
Collinson FX Market Commentary - Aug 10 - NZD does a weird rally
he AUD breaching 0.7700, while the NZD moves towards 0.7200. The NZD is rallying ahead of the RBNZ interest rate decision which confounds many as a cut in interest rates is expected. The rate is expected to be cut by to 2%, but this may be too little, too late. The RBA cut rates and the currency has rebounded strongly as interest differentials still prove attractive.
Posted on 11 Aug
Collinson FX Market Commentary - Aug 9 - RBNZ to get the stick out?
Commodity currencies held on to ground, with the KIWI moving back towards 0.7150, while the AUD consolidated around 0.76 Commodity currencies held on to ground, with the KIWI moving back towards 0.7150, while the AUD consolidated around 0.7650. NZ Markets await some expected aggressive action from the RBNZ, while a quiet week will be keenly awaiting the US Retail Sales data.
Posted on 10 Aug
Collinson FX Market Commentary - Aug 8 - Kiwi market chatter over RBNZ
The NZD is supported by interest rate differentials and holds 0.7100, while the AUD trades around 0.7650. NZ Markets are discussing the RBNZ rate decision, which is likely to cut rates, in line with other Central Banks. They would need to do this and indicate further rates to closely follow, to have a serious impact on the currency, as discovered by the RBA!
Posted on 9 Aug
Collinson FX Market Commentary - Aug 4 - USD up, EUR slips, GBP drifts
The stronger reserve triggered a slide in the bloated NZD, which fell to 0.7135, while the AUD stabilised around 0.7575 Markets were steady overnight, as EU Services and Composite PMI data came in slightly above expectations, in line with similar releases in the US and China. The US ADP Employment reported an improvement in private sector jobs. This lead to a rebound in the USD, with the EUR slipping to 1.1150, while the GBP drifted to 1.3320.
Posted on 4 Aug
Collinson FX Market Commentary - Aug 3- Australia cuts rate again
The AUD fell back to 0.7500, but under international consideration, bounced back to 0.7600! The AUD fell back to 0.7500, but under international consideration, bounced back to 0.7600! Central Bank activity has been considered under the global QE. The KIWI has also been buoyant, afflicted by global Monetary Policy, rising above 0.7200. The Reserve currency has reinforced the reality of a weaker global economy, drifting lower, undermined by the Fed.
Posted on 2 Aug
Collinson FX Market Commentary - July 30-31- US growth well short
The NZD now looks to test 0.7200, confounding the impotent RBNZ, while the AUD challenged 0.7600 The Dollar crashed after the GDP numbers, with the EUR trading 1.1180, while the GBP hit 1.3230. The failure of the Fed to implement telegraphed rate rises, has hit the Dollar as the reserve, triggering support for commodity currencies despite weakness in demand. The NZD now looks to test 0.7200, confounding the impotent RBNZ, while the AUD challenged 0.7600.
Posted on 1 Aug
Collinson FX Market Commentary - July 29 - Italy sweats on stress test
This took the shine off the recent rally in the NZD which slipped back to 0.7060 The JPY remains firm, trading around 105.25, in preparation. Commodity demand was slack on the energy and agricultural front, while metals eked out some gains. This took the shine off the recent rally in the NZD which slipped back to 0.7060, while the AUD continued to toy with the 0.7500 mark.
Posted on 30 Jul