Collinson FX market Commentary: November 16, 2012
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Equity markets continued to shed billions with economic data releases confirming the dire state of the worlds economy. European data confirmed the EC had slid back into recession tipped by the Southern states with France and Germany only just remaining positive.
The debt crises has overwhelmed EU members and the use of Monetary expansionary policies has postponed the inevitable. The spectre of inflation has now begun to appear and this is Pandora's box. The QE has been teasing the CPI and now they must act. The removal of monetary stimulus leaves only fiscal solutions and Politicians have little appetite with the growing civilian upheaval. Rioting against the austerity measures reflect the citizens reaction to even more severe measures.
In the US, data has deteriorated with the Philly Fed Manufacturing Index falling 10.7 as did the Empire State survey. Weekly Jobless claims are on the rise and will be reflected in a rise in Unemployment which had previously dropped below 8% the month before the US election conveniently assisting in Obama's re-election.
The looming 'Fiscal Cliff' undermines confidence and will build as the year end approaches. It really is not difficult.....balance the budget! No more room for procrastination!
The contraction in global demand is starting to impact the commodity currencies with the AUD slipping back to below 1.0300 and the KIWI under 0.8100. Economic data is also testing with NZ Job ads falling and Car Sales falling in Australia.
The Fiscal Cliff and the European debt crises spiral out of control infecting equities and commodities. Action is required and leaders are not too good at that.
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Collinson FX market Commentary: November 15, 2012
The world is in turmoil with the middle east on fire, Europe mired in anti-austerity riots and the US struggling with economic revolt. European riots spread across Europe including Greece, Spain, Italy and Portugal emanating directly from the austerity measures imposed to avoid economic collapse.
The crisis is spiralling out of control with protests moving to France and Belgium. The continued budget deficits add further to the crippling debt and the printing of more EURO's will not solve the fundamantal problem. Live within your means is a novel concept. The other major problem is the disfunctional single currency which is under real threat.
The GBP fell to 1.5850 after the Bank of England released minutes citing the rising inflation and the EU impacting growth which may require further QE undermining the currency. In the US Retail Sales fell and as the Fiscal Cliff approaches and it is likely economic indicators will continue to confirm deterioration. The result of the fiscal cliff will throw the US back in to recession dragging the global economy with it. Obama will raise taxes and cut defence and the economy will suffer.
Make no mistake, the Americans face an economic crises which this administration is incapable of solving.
The global situation directly impacts growth and demand which directly effects China and thus commodity prices. The AUD fell back to 1.0380 and the KIWI 0.8115.
This is likely to continue and when Central Banks realise the need to match the Fed, ECB and BofE the rate cuts will add further downside pressure.
Collinson FX market Commentary: November 14, 2012
Markets were steady overnight with European equities rising and Bond Yields slipping reflecting a reprieve for Greece. EU Finance Ministers agreed to extend budgetry requirements for Greek austerity measures out to 2016. The waver allows Greece to continue to add to the already overwhelming debt by running budget deficits until 2016 when they will limit this to 2% of GDP.
They also agreed to defer the next bailout tranche predictably kicking the proverbial can down the road. UK Inflation crept up to 2.7%, despite the weak state of the economy, which must be unsettling for Central Bankers as the sleeping giant could well bring all the chickens home! The GBP remained weak at 1.5875 and the EUR tests 1.2700. The strong Chinese economic data has given new legs to the AUD which trades 1.0425 and the KIWI approaching 0.8200.
The risk sentiment will again be tested as the EU debt crises rolls on and the US Fiscal Cliff negotiations drag on. Obama has never lead on Economic policy and defers to Congress who are divided. To avoid the fiscal cliff and certain recession is a supposed priority but precedence points to brinksmanship until the deadline and then inaction and deferment.
Democrats would not be unhappy seeing tax rises and cuts to the military so Republicans should stand aside and let the lunatics run the asylum as the people advocated last week. Democrats have not passed a budget in more than three years and the plan is to have no plan. This is similar to European Politicians and should result in a disaster for the global economy.
Collinson FX market Commentary: November 13, 2012
Veterans Day in the US means a very light trading day on Wall St and thus globally with little direction.
Markets did earlier focus on extremely positive economic data from China, with the Trade surplus expanding at the best rate in four years. The Trade Surplus accelerated at a very strong pace as exports boomed boosting commodity currencies with the AUD moving up to 1.0415 and the KIWI to 0.8175.
The link with other risk-currencies has been broken with the EUR falling back to 1.2715 and the GBP down to 1.5875. The news from China has been positive but ultimate dependence on the European and US markets has tempered the gains. In Europe the EU Finance Ministers gather this week with approval of the next Greek bail-out tranche on the agenda.
The Troika are reticent to approve this despite the Greeks passage of the new budget over the weekend. The problem is the fiscal deterioration with forecasters predicting Greek debt to rise to more than 190% of GDP! One thing for sure is that this will not end well!
The US meanwhile face the 'fiscal cliff' and the 'debt ceiling' which will inevitably lead to higher taxes no matter what the solution. The solution will definitely negatively impact US (and thus global) growth.
Obama has little grasp on the requirements of the economy and survives on personal popularity. The peoples affection will abandon him when the economy plunges back in to recession in the New Year!
You get what you pay for!
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by Collinson FX - 10:41 AM Fri 16 Nov 2012 GMT
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