Collinson FX market Commentary: June 25, 2013
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The market rollercoaster continued on steroids with equities, commodities and bonds all being hammered early, only to recover late in US trading. Chinese equities collapsed more than 5%, into bear market territory (20% below year high) amidst a huge credit squeeze as the Government attempt to get control of Monetary Policy.
In the US, the Dow moved in a 250 point trading range and the canary 10 year went up to 2.66%. Commodities took an absolute pasting with Chinese trouble easily translating into lower commodity demand. The VIX volatility index has skyrocketed reflecting the state of all trading markets. The EUR traded 1.3120 and the GBP 1.5440 with a resurgent Dollar. US economic data continues to improve reinforcing the Fed's penchant for tapering which, in turn, frightens the Equity markets.
Commodity volatility has hit the associated currencies with the AUD falling to 0.9150, only to recover back to 0.9275 with the bounce in US Equities. The KIWI dipped below 0.7700 but staged a late recovery to 0.7750.
The huge volatility is likely to continue as markets digest the new Monetary paradigm and the associated impact on economic growth. GDP growth is essential to address the enormous deficits and debt but rising yields will eat up this expansion and force economies back to structural recession.
Central Bank commitment to QE easing will be tested with rising rates and falling equities! This will be what drives markets over the near term!
Collinson FX market Commentary: June 24, 2013
Markets closed the week steady after the shock of the Fed's plans to begin to taper QE and terminate in 2014. This has crashed equity markets and sent waves of volatility through bond and currency markets. The AUD has fallen to the 0.91's but by the end of the week had rebounded back to 0.9235 and the KIWI stabilised around 0.7750.
Commodities have taken a pasting and look set to continue to test the downside as reduced QE will strengthen the US Dollar and China looks set to continue the recent credit squeeze. Chinese authorities are looking to temper the cash binge with higher rates and tight monetary policies. The squeeze will curb growth from the heady double digit growth rates back to a reasonable 7%.
This will have a knock on effect on commodity prices which will impact associated currencies. This has already manifested in the AUD which has fallen more than 10% in recent weeks. This week will continue to focus on Central Bank policies from China and Japan to the FED and ECB.
Economic data will have a secondary impact with housing data out in the US and GDP growth rates in Europe and the US. Look for a continuation of volatility as the addict weans itself off the drugs!
Watch out for the Monetary DT's!
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by Collinson FX - 1:27 PM Tue 25 Jun 2013 GMT
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