Collinson FX market Commentary: March 20, 2013
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The panic emanating from Cyprus is spreading across Europe and the global markets. Cypriot Parliamentarians saw the writing on the wall and hurriedly voted against the hugely unpopular 'Bail-In'. Uncertainty now reigns with no plan B.
They will need to head back to the ECB and IMF and negotiate new terms. The extreme outcomes are a collapse in the local banks and an exit from the EU. This seems unlikely as they have steadfastly avoided this, at great cost, across Southern Europe. The Germans will be compelled to pay, as the consequences of social upheaval or repercussions from upset Russians are far more daunting. The EUR continued to crash dropping below 1.2900 while safety plays were attracted to the USD.
In the US, Equity markets were looking for an excuse for a correction but had hoped it would not be triggered by a full blown EU crises! House Building was up slightly and Building Permits had sustained growth contradicting yesterdays news. Economic news was overshadowed by the pandamonium in Europe and looks likely to continue until a resolution is found. Leadership has been constantly tested in Europe and failed miserably!
The FOMC is meeting and is not expected to change their current dovish monetary policy. The AUD slipped back, with rising risk, to 1.0350 still undergoing their own political insecurity.
The KIWI has been soft of late but holds 0.8220 in the lead up to today's all important trade data. This may not be as bad as expected as it is historical and the worst may be yet to come. All eyes remain on Cyprus and the EU!
Collinson FX market Commentary: March 19, 2013
Markets were spooked as they opened for the week with the Cyprus crises triggering fears across the Euro-Zone. The problem revolves around the EU bailout of Cypriot Banks (which is not unusual!) but the fact that the Government would confiscate depositors funds. ECB had guaranteed depositors and forced bondholders to take the haircut.
This sets a new precedence and the worry is that it could occur in Italy, Spain etc, thus shaking what little confidence citizens have in their banks. This could trigger a run on banks and ultimately lead to another crises which could threaten the Euro-Zone itself. The EUR plunged below 1.2900 as Asian equity markets collapsed by more than 2%. EU Finance Ministers held an emergency meeting and a compromise will be forthcoming. Cooler heads prevailed by the time US markets opened and much of the earlier losses were regained. The EU remains critical and this situation demonstrates the tentative vulnerability of of the single market and the currency.
The impact this has on the global economy cannot be underestimated. In the US, NAHB Home Builder Index fell below expectations adding doubts to the accepted recovery in this sector. The AUD remains mired in political turmoil with many expecting a change in PM this week. The Government lurches from one self imposed disaster to the next and appear to be on the verge of collapse. The AUD may be susceptible to sharp moves as political developments evolve.
The AUD fell to 1.0345 with the Cypriot crises moving flows to the safety of the USD,but has recovered a little to be around 1.0370.The KIWI will be impacted by the turmoil across the Tasman and by EU events, but trades around 0.8230 in the meanwhile!
Collinson FX market Commentary: March 18, 2013
Consumer sentiment brought the market back to earth as the unprecedented rally came to a close. It appears traders on Wall Street are far more confident than the US Consumer. Sentiment fell to 71.8 from 77.6 with the impact of rising payroll taxes and increasing discovery on Obamacare costs.
The almighty consumer is the major driver of the US domestic markets and thus the economy.The Dollar suffered accordingly pushing the EUR to 1.3050 and the GBP approaching 1.5100. The massive Bull run may continue to unfold in the coming week sailing into uncharted waters with only technical chart levels to target. This week will focus on the Fed and the plethora of economic releases lead by the Housing Statistics. The RBA will meet, but expectations for any action are low with the currency flying high testing above 1.0350.
The KIWI also regained 0.8245 after a week of hits emanating from the RBNZ releases earlier in the week. We have seen some earlier downward movement in the NZD & AUD rates this am with the Euro being sold off as the news of the Cyprus banks' bailouts surface.
A look at NZ GDP will be a good guide to the state of the economy but expectations should not be high.
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by Collinson FX - 8:23 AM Wed 20 Mar 2013 GMT
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