Collinson FX market Commentary: February 21, 2013
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US Markets conceded yesterdays gains after the FOMC Minutes revealed a growing number of board members are questioning the 'costs and risks' associated with Quantitative Easing. The move is to 'taper or ease' QE infinity before it was previously envisioned. This news pushed equities lower and the Dollar higher.
The EUR crashed below 1.3300 and the GBP 1.5220 assisted by some poor Employment data from the UK and Bank of England advocating further easing in Monetary policy. This was not the only Central Bank 'jaw-boning' the currency with a long awaited fight-back from RBNZ Governor Wheeler. The currency wars have had collateral damage in terms of the KIWI and AUD disadvantaged by attractive yields and stubborn Monetary Policy.
Wheeler commented that the KIWI was too high and he would intervene. The NZD reacted accordingly crashing from above 0.8400 to be trading below 0.8350. The AUD has also slipped back to 1.0245 after the Fed triggered gains in the Dollar. US markets were not over zealous after Housing continued to defy all market commentators with Housing Starts collapsing 8.5%. This was on the back of the House Price Index taking a hit which blunts enthusiasm for a recovery in this sector which was to be a trigger for an economic recovery in the US.
The doubts entering into the collective minds of the Fed over the consequences of QE I, II and Infinity has finally started to recognise the reality of this unprecedented expansion of liquidity. This may be a signal to Central Banks to end the currency wars although KIWI and AUD need to play a lot of catch up!
Collinson FX market Commentary: February 20, 2013
US Equity markets rallied after the long weekend with some good news from Europe gave the bulls some heart. The all important, ZEW Economic Sentiment index rose to 48.2, which blew past expectations and hit 3 year highs. The reading renewed confidence that the German economy is in recovery mode and that boosts prospects for the EU. This contradicts most recent economic data with New Car Sales and Construction both falling.
A continued turnaround would be necessary to have any sort of faith in the EU as momentum is certainly negative. The EUR drifted lower at The US had little good news with the NAHB House Market Index falling below expectations at 46. Equities embraced the good news from Europe and tested 5 year highs which now is at crucial technical levels. The Dow needs to break these levels and then attack the all-time high of 14,164, but a failure to break the ceiling may see a retracement.
It has been a continuum of bleak news on the economic front but Mergers and Aquisitions have sparked confidence in equities. Activity in this area reflects a necessity for aquisition to gain growth with little happening in the generic world. The AUD regained some ground with the renewed global confidence, demand dragging it to 1.0365 and the KIWI to 0.8455
Collinson FX market Commentary: February 19, 2013
Markets were quiet Monday as the US was closed for Presidents Day holidays. European Markets drifted lower with the EUR down to 1.3350 and the GBP 1.5465 after dovish comments from ECB President, Draghi. He observed that the EU's recovery remained weak and inflation was now falling below 2% as growth contracts at an alarming rate. Italian elections, due in a week, also hold the promise of further uncertainty and thus Bond yields look to be on the rise.
The AUD traded below 1.0300 with New Vehicle Sales falling for the month and Political turmoil continuing in election year. A new challenge for the Labor Government leadership appears in the offing as Gillard crashes in the polls.
The KIWI held on to strong levels around 0.8450 after G20 assurances of an end to the 'currency wars'! Market action is likely to heat up as the Chinese return to the fray and the US react to a short week of data release.
Inherent problems surround Europe and deficit/debt issues are consuming the US and Europe. Instability politically and weak economic growth does not bode well for near term prospects.
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by Collinson FX - 9:04 PM Tue 19 Feb 2013 GMT
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