Collinson FX market Commentary: June 28, 2013
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Fed Reserve members qualified Bernankes language that triggered last weeks sell-off. It was these emissaries that have clarified Bernankes statement reinforcing the fact that QE will continue until unemployment reached 6.5 and inflation remains tamed. They clearly verified that any tapering was merely a reduction in current increases in monetary expansion.
The retrospective action is being taken to combat huge market reaction after interpreting the Feds actions as cessation and thus the big sell-off in equities, commodities and bonds. The Dollar has remained steady with the EUR traded 1.3050 and the GBP 1.5250. Commodities have found some legs and bond yields have retreated after the calming by US Central Banks which has resumed the bull market.
Pending Home Sales rose 12.5% and Weekly Jobless Claims drifted lower adding confidence to markets. NZ Business Confidence has continued to improve rising above the crucial 50 level.
The recent recovery in commodities added to the support with the KIWI rising towards 0.7800 and the AUD to 0.9275. Central Bank speak remains the primary driver of market direction!
Collinson FX market Commentary: June 27, 2013
Stocks rallied strongly on the inverse trade that has become the new norm. The corrupted economy that has become the market where 'bad news is good' and 'good news is bad' has returned! Speculation that the Fed will backtrack on the tapering has become accepted policy. Hence, US GDP was reviewed back from 2.4% to 1.8%, and the market responded with a big move up in equities!
Weekly Mortgage Applications fell 3% which was icing on the cake for Wall Street. Conviction will not be Bernanke, as he back tracks and holds to the QE policy that has typified his reign. The Dollar remains static with the EUR 1.3010 and the GBP 1.5325. Commodities remain under pressure with energy on the rise and gold lower.
The associated currencies have been resilient with the AUD testing 0.9300 after a leadership spill dumping the incumbent leader. The sheer depth of incompetency in the 'lucky country' has resulted in the least worst option...Rudd! God help the country, after he was dumped for his failures by his colleagues and now is hailed as the Messiah! The KIWI has been testing 0.7800 but risks remain on the downside.
Collinson FX market Commentary: June 26, 2013
Questions and doubts arise over the commitment of Bernanke to taper QE as the markets reaction has been extreme. Equities, Bonds and Commodities have all reacted with extreme negativity to the reality of QE reduction and the effect of high interest rates and the impact on the economic recovery has been profound. Bernanke will consider the impact of high interest rates on debt sustainability and will walk back his tapering.
The US economic recovery would stall leading to collapse back in to recession. The DOW rallied as market participants realised the reality and economic news was good. The Case Shiller Home Price Index rose 12.05% and House Sales also improved 2.1%. Durable Goods Orders rose 3.6 and Consumer Confidence hit post-2008 highs. The economic news was greeted with a rally in Equities and Commodities as inverse reaction from the QE effect was reversed.
The EUR held 1.3090 and the GBP 1.5425 were stable with the Dollar steady. The problem remains with the canary Bond Yields which continue to rise despite the news and the back tracking on QE reversal. This is the worry and continued upward pressure will scare the hell out of the Fed! Commodity support resulted in a boost for the associated currencies with the AUD trading 0.9275 and the KIWI 0.7750.
The Central bank policies will determine market moves and focus on long dated US Bonds for warning signals!
Collinson FX market Commentary: June 25, 2013
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 - 2:52 AM Sat 29 Jun 2013 GMT
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