Collinson FX Market Commentary: February 11, 2014 - Calm before storm

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Collinson FX market Commentary: February 11, 2014

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Markets were in the 'calm before the storm' with the storm being Yellens first report on Monetary Policy tomorrow. Expectations are extremely high with her reputation as a 'dove' to be tested.

Tapering has been implemented and the economic recovery is, apparently, underway!? The last couple of Jobs reports have been very weak and the temptation must be there to suspend the tapering and reinstitiute full-blown QE Infinity.

The target Unemployment rate, presents a dilemma, as it continually falls to previous set target levels. The problem is that all signs point to a corruption in reality, due to the lowest unemployment participation rate, since Jimmy Carter. The Monetary Policy report will be the most important this year and a big determinant. Lack of commitment to tapering could bring an avalanche of USD selling and reinvigorate the equity rally.

Currencies remained steady ahead of Yellen, with the EUR trading around 1.3640 and the GBP 1.6400. NZ House prices remained strong but signs of a slowdown in the housing market continue to infiltrate.

The KIWI was steady at 0.8250 and the AUD was trending in the mid-0.89's. Direction will be determined from the US Fed's analysis and interpretation of economic progress and the actions to be taken.

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