Collinson FX Market Commentary- 24 April - Markets unwind, Kiwi falls
by Collinson FX on 24 Apr 2012
Pic of the day
Collinson FX market Commentary: 24 April 2012
A wet drop in the 2012 Young 88 Nationals © Richard Gladwell www.photosport.co.nz
Economic data and the EU debt crises drives equity and commodity markets lower.
The debt crises has grown new legs as EU members rebel against austerity measures threatening the solutions agreed to.
The French Presidential elections look bad for long time Merkel ally, Sarkozy. The Socialist, Hollande, advocates increasing Government spending and increasing taxes. He would ignore the austerity measures necessary to reel in spiralling debt.
The Netherlands also face a budget crises resisting austerity and refusing to bring their budget deficits under control. This will threaten their AAA credit rating and the Northern States solidarity. Greek elections next month promise to bring further upheaval with complete default likely. Spanish bond issues will dictate direction with higher levels leading to inevitable default.
The economic data was PMI from France, and more importantly Germany, which fell below expected levels shadowing thoughts of a recovery.
Chinese PMI also remained below 50 disappointing markets as this is the growth engine driving many markets. The EUR dipped back to 1.3145 and the GBP 1.6125. In the US markets fear complete capitulation in the EU and thus cannot seperate themselves from this collapse. Markets tumbled and commodities also drifted lower with risk-appetite.
The KIWI fell to 0.8125 and the AUD to 1.0305 mired in yet another political scandal. The Labour numbers are under threat in Parliament with their Speaker standing aside after accusations of fraud and sexual harassment.
Turmoil continues to emanate from Europe which drives markets lower and looks set to continue to unwind.
Collinson FX market Commentary: 23 April 2012
Markets ended the week on a positive note with confidence in Europe boosted by some positive German Business Sentiment data.
The worry over the debt crises seemed to subside despite Spanish Bonds rising above 6%. The French go to the polls for the first round of Presidential election on the weekend so markets will be watching closely. Polls favour the socialist nominee which could strike fear into markets. France is in a precarious situation at present with the threat of debt default and possible downgrades.
Sarkozy has been a figure of unity with the Germans and supported austerity. The socialists threaten to eradicate the austerity programs and oppose Germany's Merkel as a populist move which could threaten stability and perhaps collapse the EUR itself.
Markets rose Friday and the EUR rose back to 1.3200 and the GBP 1.6115 with strong Retail Sales adding to stronger recent economic data. In the US earnings continued to support further rises in equities and commodities.
The AUD stabilised at 1.0370 and the KIWI to 0.8180.
This week will focus on Central Banks and Housing Data in the US but storms from the EU debt crises continued to roll over markets. The markets will also look closely at the FOMC interest rates decision and the subsequent appearance of Ben Bernanke.
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