Collinson FX market Commentary: May 9, 2013
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Monetary Policy continues to dominate markets with Central Banks exerting complete control over a Fiscally incompetent elected Governments. The Bank of England left Rates unchaged but maintained the current stimulus. The British Central bank is boxed in with rising inflation and threat across the board.
The US Equity markets continued to rally to new record highs fueled by Bernanke. The party continues and the bubble stretches into May. The confidence spread to the Dollar with the Yen breaking 100 for the first time in four years. The EUR also slipped back to 1.3080 and the GBP to 1.5475. Jobless claims fell as the trend slowly improves.
In NZ, Unemployment surprised many when the rate plunged from 6.8% to 6.2% which boosted the KIWI back to 0.8460 but the rise of the USD overnight pushed the NZD back under 0.8400. Australian Unemployment also fell having the same effect on the currency which also unwound with the resurgence of the 'Big Dollar'!
The AUD now trades at a recent low around 1.0100 and may challenge parity as economic conditions deteriorate with a dramatic budget expected next week in the lead up to Septembers election. Central Bank action should be a sign of the desperate state of economies as emergency interest rate levels are just that.
Any sign of further deterioration may overwhelm the liquidity flood currently supporting equities and commodities.
Collinson FX market Commentary: May 8, 2013
The RBA joined the 'currency wars' yesterday as they cut rates to the lowest levels since 1959/60. These record lows may not be the end, as the powder remains dry, and the Governor remains ready and able to cut further. The economy is showing signs of distress as the Australian position has deteriorated in the last year after surviving the GFC relatively well.
The strong Fiscal and Monetary position the economy was in prior to the GFC had allowed the Ozzies to weather the storm but the Global paradigm has changed and the Labor Socialist Government have carried Keynsian theory a bit too far. The have stretched the tenure of stimulus beyond comprehension.
They have borrowed to replace revenue (but never lost the revenue) and have exhausted the all reserves and piled up a AUD$300 Billion debt! When your revenues continue to increase but your expenditures exceedRBA cuts to lowest x these, then fiscal incompetence is to blame. The RBA has acted to counter the 'currency wars' with the AUD stubbornly holding above parity for an extended period destroying trade competitiveness.
The Fed has added $2.3 Trillion to the Balance sheet since 2008 and the ECB have similar excess. The BoJ had recently joined the party and the RBA had had enough. Ironically the poor economic conditions, that have triggered these actions, have been the cause of bubbles with no better example than world equity markets. The DOW has now blasted through the 15,000 mark and with $85 Billion added every month by the Fed, liquidity is the problem!
The EUR hit 1.3080 as the GBP slipped below 1.5500. The Big Dollar is being fundamentally undermined by Bernanke, thus the impact of the RBA's 0.25% cut was minimal, falling to 1.0175. The KIWI was dragged back under the 0.8500 mark. It is very difficult to fight against Central Banks and bubbles created will cause much greater problems anon!
Collinson FX market Commentary: May 7, 2013
Equity markets were steady after the substantial gains of last week boosted by an ECB rate cut and a better than expected Non-Farm Payrolls. European markets absorbed steady PMI numbers but falling ECB Retail Sales.
The endless recession spurred Draghi back to the microphone where he promised to take whatever action necessary to right the ship.
The immediate impact was felt in the currency with the EUR falling back to 1.3075. The US markets were steady with the DOW hitting 15,000 on Friday but failing to hold and has now set a benchmark. There was little local news but plenty to come, plus add in the developing situation spreading war across the Middle East! The AUD slipped lower to 1.0250 in preparation for an expected cut from the RBA this week.
Australian Retail Sales contracted and Job Advertisements also fell 1.3%. Economic fundamentals have been deteriorating in Australia for some time and now they are amidst the 'longest election campaign in History', expect unprecedented volitility.
The KIWI held 0.8500 and continues to book gains against its trans-Tasman cousin. Testing times on the Geo-Political front with economic fundamentals hardly inspirational.
Collinson FX market Commentary: May 6, 2013
Non-Farm Payrolls came in better than expected fueling the rally in equities. The Dow has now toyed with the 15,000 level and the endless rally continues with no likelihood of Bernanke turning off the liquidity taps. This boosted the EUR which moved back to 1.3115 and the GBP to 1.5565.
Risk appetite continues to flourish boosting associated higher yielding currencies. The AUD breached 1.0300 and the KIWI moved over 0.8500 once again. The rally has been sustained by concerted Central Bank intervention and seems likely to continue until fundamentals tip the balance and cause reality to crash the party. Non-Farm Payrolls gained 165,000 with Unemployment falling to 7.5%.
The good news supported the markets despite Factory Orders falling 4%.
The new week will bring more economic data analysis and perhaps consideration of an interest rate cut in Australia. This is May!?
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by Collinson FX - 9:27 PM Wed 8 May 2013 GMT
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