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Collinson FX Market Commentary- May 17, 2013 - AUD falls further

by Collinson FX on 17 May 2013
240313AucklandRegattaDay3 (24) - 2013 Auckland Cup, Day 3 © Richard Gladwell http://www.richardgladwell.com

Collinson FX market Commentary: May 16, 2013

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A slew of unexpectedly bad economic data did little to deter equity markets which seem impervious. The bad news is interpreted as 'good news' as this reinforces the rationale behind the Fed's QE program. Good News is treated as 'Good News' so markets take on more risk and the bubble continues to expand. This is insanity and can now be blamed upon Bernanke justified through fiscal incompetence. The shine also came off the USD with the EUR edging back to 1.2900 and the GBP back over 1.5300.

Weekly Jobless Claims rose 30,000 and the Philly Fed's Manufacturing reported a 5.2% contraction. This news was further tainted by the massive fall in Housing Starts. They fell by a huge 16.5% although this was somewhat mitigated by the rise in Building Permits issued. Japanese Industrial Production rose 0.9% for the quarter giving some growth to an economy mire in stagnation for more than 20 years.

The Japanese paradigm is the snapshot of the future for Europe. Economic contraction and or stagnation for the foreseeable future. This is what lawmakers should be adjusting their new reality to. It looks pretty attractive compared to the crises of collapse they have been facing for the last five years! With signs of life in the Bond Yield market and jumps in the Dollar many could judge some safety plays in motion.

Commodities continue to be hit and thus the flagging USD has done little to arrest the fall in associated currencies. The AUD is now trading under .9800 with a stream of weak economic data confirming weaker resource demand.

The KIWI traded 0.8150 after a predictable budget charting a course to surplus. Conservative Budgets will reassure rating agencies although the NZ economy still faces huge challenges as Global Market conditions deteriorate.


Stocks were flat-lining in the US after some further weak economic data from Europe and domestically. In Europe, French GDP continued to contract and was joined by the engine room of Europe, namely Germany. Overall EU GDP contracted 0.2% for the Quarter and 1% for the year.

This extends the technical recession and shows the dire straights the single market is in. In the US the Dollar has continued to rise bucking the long term recovery trends. The initial reasoning was due to the economic recovery America was undergoing. Economic data points to a slow recovery with Industrial and Manufacturing Production both contracting as did the Empire State Manufacturing report.

Housing has been mixed but it is the rise in yields that may be the real canary in the mineshaft!? Rising yields, despite Bernanke endless ocean of liquidity, should send major warning signals to risk markets....especially equities.

The EUR continued to fall against the Dollar trading 1.2870 and the GBP 1.5215. Commodities are drifting in the face of the Dollar rise and have continued to impact the associated currencies. The AUD is now trading 0.9875 and the KIWI 0.8220. We are breaking some decent downside technical levels so look for triggers to see a major turn in risk sentiment.


Collinson FX market Commentary: May 15, 2013

Markets continued the bull run which seems to be mindless considering economic fundamentals. It appears that the Fed has overwhelmed all sensibilities by flooding the markets with ever increasing liquidity but there is a limit.

The Fed is fast becoming 'too big to fail'. The EUR fell back to 1.2930 and the GBP 1.5225. Commodities took a hit with Chinese demand flagging and data so good that even the believers starting to doubt. The statistics defy logic with the uniformity and should be questioned because of the source.

The peripheral currencies continue to suffer the risk aversion trade with the AUD now below 0.9900 and the KIWI 0.8180.

There is more downside available as the Dollar surges from a risk prospective rather than the vaunted economic recovery. Turmoil will spread to equities.


Collinson FX market Commentary: May 14, 2013
Rumours swirled in the US, that the massive Bond Buying program the Fed has blessed the markets with, may be coming to an end. The Fed is said to be dipping their collective toe in to the water to test the temperature. This is a signal of moves to cut the $85 Billion monthly Bond Buying that has been referred to as QE Infinity.

The reason Bernanke launched the continuous stimulus package was the dire state of the US economy and the recent improvement may tempt the Reserve Bank to return to reality. The problem is that the economy has stabilised but there are more challenges ahead, especially from Europe. The Dollar continued to rise after the G7 endorced the Bank of Japans QE program which has seen the JPY hit 102.00 and charts say may see a move to 105!.

The EUR was steady at 1.2975 and the GBP below 1.5300. Hard commodities drifted lower with the rising Dollar, which has pushed the associated currencies back.

The AUD has well and truely breached parity, trading 0.9950 and the KIWI slipped to 0.8240 despite House Sales rising 25% tempered by a flattening in prices. In the US Retail Sales rose 0.1%, beating expectations, which has improved the GDP growth outlook. Chinese Industrial Production grew 9.4% and Retail Sales rose 12.5% continuing a trend of bullish, consistant and doubtful economic data releases.

The trends are positive but equities have exploded because of Monetary policy and any contraction will result in a massive correction which will hit risk appetite hard! Mid-May


Collinson FX market Commentary: May 13, 2013

US Equities closed on a new record high compliments of massive liquidity flooding markets looking for a return. The US Dollar surged again as a result of relative confidence in the US recovery vis-a-vis the other Economic Zones.

The EUR slipped below the psychological 1.3000 and the GBP floundered to 1.5350. Commodities took a bath as a result of the surge in the USD and perhaps a reflection of softening demand.

Consequently the associated currencies suffered with the AUD breaking parity and the KIWI under 0.8300. May rolls on without any adversity in the Equity markets with New Yorkers declining the opportunity for a holiday!

A quiet week in terms of economic data will be followed by a very busy week coming. Growth numbers in the EU and Inflationary data will be a guide to the state of any recovery in the 'submerging nations'!

The US will have a close look at the vital Housing sector and the consumer with Retail Sales releases. A very busy week so be prepared for some volatility especially with the currencies perched on some very suspect technical levels!

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