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Collinson FX Market Commentary: December 30, 2012 - Fiscal Fiasco

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Collinson FX market Commentary: December 30, 2012

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The New Year beckons and expectations must be ordinary with the parlous state of European and US Markets. Friday saw another large and late sell-off in equities with the continuing fiasco that are the Fiscal Cliff negotiations. The Cliff is due to hit at the start of the year and looks likely to be crossed. Obama dramatically returned from his Hawaiin vacation to solve the crises that has been in the making for 2 years.

This was all for show as his offer was his original position giving nothing. He expects to tumble over the cliff and then introduce tax cuts for the majority thus blaming the Republicans and labelling himself as the saviour and a tax cut President. We will see! The Markets reflected this with five days of continuous losses reflecting the disaster about to befall the US and Global economy.

This should ensure recession returns to the US and extends the EU crises and recession/depression. It will not be until the second half of the year that we may see some weak recovery.

Commodities drifted and dragged the currencies associated lower. The AUD fell to 1.0370 and the KIWI dipped below 0.8200. Fiscal Cliff will drive markets to kick off the New Year and economic data will take a back seat. This week will have all important Non-Farm Payrolls but will fundamentally overwhelmed by political developments.

Collinson FX market Commentary: December 29, 2012
Obama returns to Washington to solve the latest budgetary crises besetting the nation. That the crises was created by the Democrats seems to matter little, as blame is heaped upon the Congressional Republicans. Obama leads the media and consequently public opinion but that is not how the impasse will be solved. The heart of the crises is the overwhelming Budget deficit which has pushed US debt to over 100% of GDP.

The Government is spending more than $1T a year more than they collect. This adds to the crippling debt that has now broken $16 Trillion. Keynsian arguments have long since been exhausted and the harsh reality of incompetent spendthrift Political leaders driving the worlds largest and most successful economy to destruction must be faced. The EUR drifted at 1.3215 and the GBP 1.6075 with the Eurozone a basket case also. In the US, Consumer Confidence collapsed from 71.5 to 65.1 reflecting the state of the most important driver in the economy.

New Home Sales did provide some positive relief rising 4.4% and Weekly Jobless Claims fell by 12,000. China Industrial Production continued to defy global markets, rising 3.0%, supporting commodity prices. The AUD held 1.0370 and the KIWI 0.8175.

Market trade is light so the fall in US equities is accentuated and could be addressed by a last minute deal fashioned by the President. It is more likely they will fall over the Fiscal Cliff but will introduce some new Obama Tax Cuts after the New Year!

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by Collinson FX

  

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1:58 PM Sun 30 Dec 2012GMT


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