Collinson FX Market Commentary- 18 May 2012 - Greek Bank run feared
by Collinson FX on 18 May 2012
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Collinson FX market Commentary: 18 May 2012
The crew douses sails aboard 180-foot HMS Bounty Jennifer Spring http://www.tallshipsamerica.org/
Europe spread fear across global markets once again with Greece being downgraded from Fitch and other ratings agencies looking at Spain. The ECB has cut liquidity to some Greek Banks after a run on EURO's. Many Greeks are taking the EURO out in preparation for the return of the Drachma which leads to the run and fuels liquidity issues and survival of the very institutions. The 'run' is the biggest fear of any bank.
In Spain, Moody's are set to downgrade a series of Banks after doing the same to Italian Banks.
The EU Banking sector looks vulnerable and all the liquidity pumped in by the ECB through the LTRO does not seem to have improved the situation. After filling their boots with ECB cash the Banks reinvested in Sovereign Debt but those Bonds have risen to record highs thus ensuring heavy paper losses.
The single currency is under pressure at 1.2700 and the GBP is also taking a hit at 1.5810. Further bailouts from the ECB look likely.
In the US, the deteriorating conditions in Europe has seen risk markets hammered with equities and commodities all suffering badly. The May-Sell scenario continues with intent! Economic data is also on the decline in the States with Leading Indicators falling 0.1% and the Philly Fed Survey falling 5.8 after an expected gain of 10. Economic data is historical and the uptick from the beginning of the year looks to have faltered. Conditions are fast declining with market confidence.
The AUD is holding reasonably well at 0.9930 but the KIWI is under pressure. The NZD traded 0.7650 after Consumer Confidence fell in line with a series of weak economic data.
The Greek election is not for another month so uncertainty is set to continue for some time.
Collinson FX market Commentary: 17 May 2012
The political crises in Greece envelopes Europe and the world as the Greek President calls an end to negotiations and appoints an interim Government led by a senior judge.
New elections will determine whether Greece remains in the EUR or returns to the drachma with polls pointing to anti-austerity parties gaining ground on the traditional political parties. The ECB is said to be pulling funding from certain Greek Banks who are under extreme pressure as depositors pull their EURO's to protect against withdrawal from the single currency.
In the US some strong economic data failed to impress markets weighed down with the European crises. Industrial Production rose 1.1% and Housing showed some further positive signs. Weekly Mortgage Applications rose 9.2% and Housing Starts gained 2.6% although this was tempered by a fall of 7% in Building Permits. The Fed released their minutes with some members calling for QE3 which gave equity markets some hope.
The EUR continued to decline at 1.2720 and the GBP 1.5920.
Commodity currencies flailed around with the KIWI suffering further declines after weaker economic data and growth reviewed lower. The AUD has consolidated below parity now trading 0.9915. The European crises will not be going away any time soon, with no resolution in sight, so prepare for further volatility.
Collinson FX market Commentary: 16 May 2012
The Political crises in Greece continued to unfold as talks halted with a call for a new election. The new Socialist French leader, Hollande, meets with Merkel and the results will be interesting. Hollande rejects austerity and proposes growth through investment. I am sure Merkel believes in the Growth concept but rejects further debt to fund it!
Germany lives this, with GDP rising by 0.5% for the quarter avoiding recession and dragging the EU to 0.0%. Many of the EU members are in 'double-dip' recession mired in debt and struggling through austerity to restructure their economies out of deficit in an attempt to reduce debt.
Greece is beyond this difficult struggle as debt forgiveness would not solve their structural deficit. They clearly have no appetite to address this with austerity! The risk aversion trade continued with the EUR falling to 1.2740 and the GBP testing 1.6000.
In the US, markets traded nervously driven by the train crash unfolding in Europe despite some positive economic data. The Empire State Manufacturing Index rose to 17.09, smashing expectations, supported with some good news from the housing sector. The NAHB Home Price Index rose to 29 also beating expectations.
On the flip side, Retail Sales slipped back towards zero reflecting a nervous consumer. Demand crashed confidence pushing the commodity currencies lower.
The AUD traded 0.9950 after RBA minutes confirmed a slow economy and further interest rate cuts likely. The stream of weak economic data from NZ is belting the KIWI which is testing 0.7700 and looks extremely vulnerable!
Collinson FX market Commentary: 15 May 2012
The markets continued to plunge fueled by the Greek political impasse and turmoil ensuing. Traditional Greek Political parties do not have the numbers to do a deal and the new emerging parties refuse to accept austerity. This will force a new election next month with support for the new anti-austerity parties likely to grow. This all certainly points to Greece leaving the EURO which could be the first shoe to drop.
It also could be the life saving operation needed to remove the cancer in an effort to save the patient! The EUR continued to weaken as the crises unfolds moving down to 1.2840. Spanish Bonds reflected this rising to highs.
EU Industrial Production contracted under the effects of austerity but the more worrying developments are political. Merkel is losing momentum in Germany with movement towards the anti-austerity left. The new pro growth, left message is a figment of the imagination. It is deficit and debt overwhelming these nations and until they can control this, disaster approaches. The fiscal austerity could be overcome through monetary intervention by the ECB.
Printing more money may solve the immediate crises but undermines the wealth of citizens. This may be the answer as it is working in the US although it will come to naught as inflation grips the Zone as in Germany many years ago. Wheelbarrows instead of wallets.
In the US a dearth of economic data focused the markets on Europe and pushed equities lower.
Commodities continued to suffer with the associated currencies. AUD fell below parity trading 0.9965 and the KIWI following 0.7775. Risk off trades drive market vulnerability endorsing the May Sell phenomena.
Collinson FX market Commentary: 14 May 2012
Markets steadied to close the week despite some disturbing new from JP Morgan.
The big news that shook markets was for once not the political upheaval gripping Europe. JPMorgan announced a huge loss attributed to some French trader working out of the City of London. This loss was described as a hedging bet gone wrong but to lose over US$2 Billion in under six weeks, it reeks of derivative trades. The loss was substantial but the implications were far more far-reaching. The systemic losses that lead to the GFC had been realized apparently. This was not to happen again so who has their pants down? Further revelations this week will answer more questions.
Meanwhile Europe continued to wobble with the Greek impasse continuing and no end in sight.
The EUR dropped to test 1.2900 and the GBP has also fallen to 1.6070.
The crises engulfing Europe has killed risk appetite and demand pushing the AUD back to parity and the KIWI to around 0.7800.
This week holds plenty of economic indicators but markets will be concentrating on political developments in Europe.
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