Collinson FX market Commentary: April 12, 2013
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US equities continued to break new ground with the DOW approaching an unprecedented 15,000! The inexorable rise is unabated with the Bulls in total control of equities and related risk assets. Weekly Jobless claims fell 42,000 for the week as the Fed's printing presses run white hot. To discern the impact of the Fed, look at the strong correlation of the Feds balance sheet and the DOW! Inflation, or lower unemployment, are the only mechanism to halt this reckless expansion of the money supply but we can not have inflation without growth and we certainly cannot have stronger employment without an improvement in the economy.
Bernanke has written his own ticket for QE as inflation and employment are never going to improve to desired levels to warrant a rise in rates. This is the plan, as the fiscal kamakazi that is the Obama regime requires endless supplies of liquidity and a rise in interest rates would result in default! The EUR booked gains to 1.3115 and the GBP continues to rally strongly to reach 1.5400 as the Dollar destruction continues. The signals from Australia continue to dampen expectations, with a spike in Unemployment to 5.6%, losing 36,000 jobs.
The hopeless and damaging Labor Government stumbles from one disaster to the next, taking fiscal ineptitude to new levels. The AUD, ironically, rallied to 1.0550 pushed by the reserve currency weakness rather then economic fundamentals and the victim of the currency wars. The KIWI booked even greater gains, surging to record levels, hitting 0.8625 as major currencies wither in the face of liquidity explosions. There appears to be no end in sight, travelling in unnavigated waters, but May approaches and surely economic fundamentals must prevail amidst the Central Bank monetary insanity!?
Collinson FX market Commentary: April 11, 2013
The Equity bubble continues to expand with ever increasing enthusiasm supported by the Fed, in the US, and other Central Banks globally.
The Japanese have recently introduced an unprecedented QE Bond buying program which has had an immediate impact on the equity market. The surge in risk markets is a direct result of the 'currency wars' in the US, Japan and Europe and continues to roll-on with the expansion of Money Supplies. Risk currencies that have not directly participated in the expansion of the money supply have surged to unwarranted levels with the AUD 1.0535 and the KIWI 0.8545.
The strength in these currencies should be seen as a weakness in the reserve currency, by which they are measured, rather than domestic economic conditions. The Fed minutes were released overnight, showing a division amongst members with regards to the timetable for withdrawal of QE. This could be seen as a warning that the lolly scramble may be coming to an end as this dangerous bubbles develop, but no! This was interpreted as a green light and foot flat to the floor.
This is a feeding frenzy with the bulls on fire. The DOW is now headed for 15,000 but a correction is imminent with May on the way.
The Chinese Trade balance turned negative, with Exports outstripping Imports, resulting in a deficit of $884 Million.This was seen as a positive for suppliers such as Australia as demand grows. A closer look at Australian Employment and CPI may temper today's local share market rally.
Collinson FX market Commentary: April 10, 2013
The 'Bernanke Bubble' continued to inflate by never been seen proportions with the DOW breaking all records with no apparent fundamental trigger. The sheer volume of liquidity being pumped into the US economy has resulted in this huge expansion in risk, share markets.
There are no fundamental economic reasons for the moves and earnings kicked off with lower expectations. In Europe, German trade numbers improved with the Current Account surplus improving although this was due to contraction. Exports fell but imports fell at an even greater pace, improving the number.
The EUR improved to trade 1.3100 and the GBP to 1.5335. Risk currencies with higher yields benefited with the KIWI to 0.8500 and the AUD back above 1.0500.
Confidence is sky high and the Bulls are on the biggest run for many years. This unprecedented surge in risk activity will correct but it will be a brave person that picks the when!
Collinson FX market Commentary: April 9, 2013
Markets were steady overnight as the US embarks on Earnings season with the traditional release of Alcoa after the bell. After stella earnings for a number of quarters, expectations are low which may allow for some upside with any positive surprises. Equity markets recovered from Fridays US Jobs shock, with the Bank of Japan embarking on its own unprecedented QE.
The promise of a massive extension of the Central Banks balance sheet will give huge impetus to the equity markets and allow the Yen to weaken, stimulating trade growth. Of course this raises the stakes in the 'currency wars' and the fight to the bottom. The EUR held ground around the 1.3000 and the GBP 1.5250 with a small rise in German Industrial Production despite a fall in EU investor Confidence. The AUD regained 1.0400 after a deal was signed by the PM with China to allow the direct trade of the AUD with the RMB.
This should allow for the enhancement of bilateral trade although the actual trading mechanism will be interesting as the Chinese currency remains fixed while the AUD is floating. Locally Holden announced further layoffs disappointing many as the reality of a high cost economy continues to manifest throughout the Manufacturing sector.
The KIWI tested just under 0.8450 faring well in the face of debasement of major, measured currencies. The fear of inflationary bubbles has prevented Central Banks in the higher yielding countries to enter the battle to the bottom but there is scope to act.
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by Collinson FX - 10:45 PM Thu 11 Apr 2013 GMT
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