Collinson FX Market Commentary- 27 April - Soft US Bull Run continues
by Collinson FX on 27 Apr 2012
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Collinson FX market Commentary: 27 April 2012
470 Mens crew racing under perfect control in the big breeze at Hyeres © Jean-Marie Liot /DPPI/FFV
US equity markets continued the bull run following this weeks sentiment.
In Europe markets drifted lower after some weak economic data. A series of confidence reports including Business, Consumer and Industrial all declined reflecting the perception in the EU. Considering the EU Debt crises and the political instability surrounding senior members, France and Holland, they have held up well. This tinder box could be struck at any time and global markets remain extremely wary. This seems to be the major proviso with global economic recovery.
The markets turned in the US with some good news from the much maligned housing market. Pending Home Sales rose 4.1% for the best in over two years. This gave the bulls some appetite and equities soared pushing the USD lower as sentiment rose.
The EUR rose to 1.3240 and the GBP recovered to 1.6190.
Commodites also found support rallying associated currencies with the AUD approaching 1.0400 and the KIWI 0.8150.
The strong rally this week has been on low volume and authenticity may be doubtful without fundamental support.
Collinson FX market Commentary: 26 April 2012
US Federal Reserve's FOMC issued no surprises with moderate growth predictions and steady inflation. Bernanke expects employment to recover slowly and stand ready to intervene with further QE if conditions deteriorate. Inflation is not a problem with little upward pressure with anemic growth.
Real inflation in the market, nonetheless, is being acutely felt by the consumer led by Gas prices and the flow on to all consumer items affected.
Markets were unimpressed with the Fed's unchanged bias and remained positive fueled by the boisterous Apple profit numbers. Apple is now the biggest company in the world and they blew past expectations! Markets took heart but not many can even dream of their performance.
Housing remains depressed with the S&P Case Shiller falling 3.5%, New Home Sales falling 7.1% and the Home Price Index remaining flat. Mortgage Applications fell 3.8% despite the record low interest rates. The poor housing data was reinforced by dropping Durable Goods Orders falling 4.2% but economic data was overlooked with strong corporate earnings and no bad news from Europe.
The EUR held steady above 1.3200 with the GBP slipping to 1.6150 after GDP numbers confirmed they have slipped back in to a double dip recession.
Commodities and associated currencies rose slightly with higher confidence with the AUD 1.0340 and the KIWI 0.8130.
Gains this week may be short-lived with May around the corner! Sell in May...go away!
Collinson FX market Commentary: 24 April 2012
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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