Collinson FX Market Commentary- 4 May 2012 - KIWI plunges, AUD soft
by Collinson FX on 4 May 2012
Pic of the Day:
Collinson FX market Commentary: 4 May 2012
The Nacra 7 at the ISAF Evaluation Trials in Santander. . ..
Markets fell overnight with the the ECB keeping rates unchanged at 1% but with ECB Head, Draghi, observing worsening economic conditions. He also indicated the EC was 'subject to downside risks' which corroborates recent economic data. The EUR slipped to 1.3140 and the GBP 1.6175 as risk aversion moved to the safety of the USD.
In the US negative sentiment shifted from Europe and was reinforced with the ISM Non-Manufacturing report falling to 53.5. This was down from 56 and much lower than expected having a huge impact as services are 90% of the economy. Weekly Jobless Claims fell but expectations are not bullish for the all-important Non-Farm Payrolls tonight.
Commodities suffered falling demand and the KIWI was hammered after some very disappointing employment data. Unemployment was expected to fall to 6.2% reflecting improving economic circumstances but shocked many with a sharp rise to 6.7%.
The KIWI plunged to test the key 0.8000 level. The AUD showed continuing signs of weakness, 1.0250, with all the political fallout and the all important budget coming in the next few days.
Collinson FX market Commentary: 3 May 2012
The EU debt crises simmered with likely triggers from all over the zone starting with the the French Presidential elections. In economic news the EU PMI hit a 3 year low falling to 45.9. Employment continued to rise with breaches over the 10% mark.
In the US the first of the major jobs reports disappointed with the ADP adding only 119,000 Private Sector jobs. Expectations are closer to 170,000 and does not bode well for the Non-Farm Payroll Friday. Factory Orders in the US also fell to a 3 year low dropping 1.5%. After a period of steady growth in the US the economy seems to have stalled testing the steel of investors.
The EUR drifted lower to 1.3150 and the GBP below 1.6200. Commodity prices also weakened pushing the associated currencies lower. The KIWI is testing the 0.8100 with some important employment data out today.
In Australia political turmoil ensues and the economy cannot prosper under those conditions. The AUD struggled around 1.0300 suffering the fallout from the unexpected 50 RBA rate cut. Economic conditions have triggered the RBA moves so it cannot be misconstrued as positive.
Collinson FX market Commentary: 2 May 2012
The Bulls remain in charge as markets defy the adage regarding selling in May.
Looking for reasons to buy was not hard as analysts focused on the ISM Activity report hitting a 2 year high rising to 54.8 from 53.4 beating expectations. Construction Spending also turned from negative to positive reinforcing the good economic news in the US.
Markets were closed across Europe celebrating May Day although the UK managed to post some poor PMI numbers falling below expectations. Risk appetite rose with the confidence in the US markets and the EUR took advantage rising to 1.3235. The GBP held, despite the weak data, at 1.6225.
The big news came from Australia with the RBA acting decisively to cut interest rates by 50 points! The benign inflationary pressures and floundering economy aided the RBA which was also under extreme political pressure from a embattled Labor party. This drove the currency lower by a cent from the surprise extent of the move. Economic data supported the move with House Prices continuing to stumble and Commodity prices drifting lower.
Australia is under extreme pressure politically, with the Government looking extremely vulnerable and teetering on the edge. Political instability does not fill markets with confidence so a need to act by calling an election and an end to the instabilty may be likely, if not compulsory. Gillard clings to power like a flondering man in quicksand. The train wreck must stop!
The KIWI showed signs of weakness tainted by the Australian quandary holding 0.8150.
Collinson FX market Commentary: 1 May 2012
Spain confirmed that they were back in recession after the last quarter GDP contracted 0.3%. This was the second consecutive quarter of contraction and confirmed the 'double-dip' recession. This comes after S&P downgraded Spanish sovereign debt and 16 leading Spanish Banks. This will further raise interests rates adding to the pressure austerity is imposing on the economy.
The EUR slipped back to 1.3230 and the GBP 1.6225 as risk appetite edged lower.
In the US the Chicago Fed's Business Activity Indiex fell to 56.2 from 62.2 while Personal Income and Expenditure remained fairly flat. This is the beginning of May which normally heralds a 'sell-off' so markets will look to employment reports in the US to trigger an excuse and break downside technical levels.
Commodities drifted from last weeks highs with the AUD slipping back to 1.0400 with New Home Sales falling 9.4%.
Australia is falling deeper into political crises with the Labor Leader, Gillard, sacking the Speaker of the house and another key caucus supporter testing her knife edge majority in the lead up to the budget. The RBA Interest rate decision is expected to cut interest rates today after concerted political pressure and signs of a slowing economy.
In NZ the KIWI slipped back to 0.8170 in line with international markets. NZ trade data was fairly positive but Building Permits skyrocketed 19.8%.
Collinson FX market Commentary: 30 April 2012
Friday completed a week of rallies with the absence of further bad news from Europe and some strong US corporate earning.
Housing data was mixed but the US learnt the economy was growing at a slower rate than expected.
The US GDP came in at 2.2% down from 3%. The poor economic data failed to spook equities markets which completed a very strong rally at the close.
The EUR reflected the strong appetite for risk rising to 1.3250 and the GBP up to 1.6250.
Commodities also continued recent strength with the AUD hitting 1.0475 and the KIWI 0.8225.
The coming week holds a slew of economic data led by employment data in the US. Chinese PMI and European numbers will also hold interest. The RBA has their rate decision meeting Tuesday with the ECB later in the week.Remember the old adage...'Sell in May...Go away!'
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