Collinson FX market Commentary: October 27, 2012 Click here to find out how to get CollinsonFX's free iPhone app
Markets closed the week flat as the political crescendo builds in the US. US GDP (2%) surprised many beating expectations for growth in the third quarter. Rises in Government Spending, Consumption and Housing all added to the good news.
The end of quarter Government spending is the 'use it or lose it' scenario whereby allocated budgets must be spent or lost. Consumer Confidence also rallied rising although below expectations. The EUR traded 1.2930 and the GBP 1.6100 after more romours of Greek failures in terms of the austerity program.
Commodity currencies fared better with Fitch re-affirming Australia 'AAA' status and solid appetite for the interest rate yields. The AUD traded 1.0350 and the KIWI back over 0.8200. The coming week will be the final full week before the Presidential Elections in the US and culminating in the all important Employment data Friday.
A huge week with little likely to move markets in terms of Equities, Commodities or Currencies as the most important poll of all approaches! Collinson FX market Commentary: October 26, 2012
Markets continued to range trade with little of substance in terms of eco-political events to move the dial. In Europe there were no major economic releases and the EUR traded steady at 1.2950 although the GBP surged to 1.6120 after some solid GDP growth.
UK GDP grew 1.0% for the quarter exceeding expectations with the Olympic bounce. In the US, equity markets stalled in the lead up to the Presidential elections although rumours swirled of a Fitch downgrade on the horizon for the worlds largest economy. Pending Home Sales disappointed barely gaining 0.3% after growing expectations for the housing sector. Durable Goods Orders gave some reason for confidence jumping 9.9% and Weekly Jobless Claims falling 23,000.
The KIWI rallied strongly after new Reserve Bank Governor, Wheeler, continued the status quo. Any thoughts of a pro-active Central Banker were dashed with more of the same. Despite Central Banks globally slashing interest rates to zero and recognising the impact this has had on the currency he has decided to maintain the rate differential presumably fearing inflation and a new housing bubble. There can be no significant inflation without growth but he has no intention of even popping the cork on the Genie bottle. He may know something we do not!?!?
The NZD surged to 0.8220 with little prospect of a rate cut thus supporting the currency. The AUD held ground as the RBA ponders a Melbourne Cup/US Election rate cut. The AUD traded 1.0350 as economic circumstances deteriorate and the Government flounders with revenue disease hitting the promised and sacred budget surplus.
This is becoming even less believable if that is possible? The US elections will continue to dominate with a rally on for a Romney vistory and the opposite for more of the same! Collinson FX market Commentary: October 25, 2012
Markets remain steady awaiting major economic or political events this side of the Presidential election. European economic data continues to disappoint with the PMI falling to three year lows, level with the Post-GFC Recession.
Greece has announced a moratorium on austerity caveats enabling them to continue to blow-out any and all Bailout targets and still receive funding from the EC. The decision must be based on the premise that anything and all must and will be done to prevent the first shoe to drop!
The sheer desperation is astounding and the costs to the EC undisclosed. In Asia the Chinese PMI contracted for the 12th straight month still operating below 50. The AUD contradicted other risk aversion with a strong move back to 1.0350. This was due to a surprising blow-out in inflation data. The CPI rose 1.4% for the quarter and 2.0% for the year.
This is due, in the main, to the flow on effects of the Governments Carbon Tax. The Carbon Tax effects major Carbon producers but necessarily raises the price of electricity across the board. Electricity and Gas have risen over 15% for the quarter, which is the biggest rise ever recorded! It is the flow through of these cost that are impacting the economy as this is a universally pervasive tax. This continued inflationary pressures have increased the cost of living to a struggling citizenship and terminally affected Manufacturing relying on electricity and gas. Ironically, Government reports an increase in future carbon emissions and with rising global coal exports, rising Global Carbon emissions! A planned hatched in Academic Heaven and endorsed by naive liberal acolytes.
In the US, New Home Sales rose 5.7% although Weekly Mortgage Applications fell 12%. The Feds two day meeting ended with no interest rate change and an endorsement of Operation Twist and QE Infinity. Growth was moderate with record low interest rates to continue to mid-2015. Nothing new from the Fed with rumours flying of the impending resignation of Bernanke whatever the election result.
The EUR continued to trade below 1.3000 although the GBP rallied to 1.6030. EU Debt crises developments and the Presidential elections will dominate markets for the next two weeks although many will watch the RBNZ and their penchant for positive pro-active policy!? Collinson FX market Commentary: October 24, 2012
Equity markets plunged overnight with growing fears from Europe and disappointing corporate earnings from the US. In Europe, S&P downgraded some regional Governments in Spain while news that the economy is contracting at a greater pace than expected.
The third quarter GDP contracted at 1.7% after austerity had hit the second quarter by 1.3%! The enormous collapse in growth as a direct result of austerity measures will push panic buttons across Europe. The medicine prescribed has the collateral damage that will impact these nations socially with citizens rioting the hardship. This should serve as a stern warning to the US and the track they have been on.
It should drive voters away from the failed policies of the left with the spend and borrow mentality fueled by corrupted Keynsian economics. The EUR dropped below 1.3000 and the GBP under 1.6000 as confidence collapsed. The Reserve Bank of Canada left rates unchanged as the Fed met for their two day meeting. Expectations are for no further action reliant on QE Infinity!
The AUD fell back to 1.0250 and the KIWI to 0.8115 with risk appetite hemorrhaging with Australian Leading Index failing 0.8%.
The digestion of the Australian Mid-Year Budget update is seen as the 'shuffling of the deck chairs on board the Titanic' to many commentators! Collinson FX market Commentary: October 22, 2012
Markets continued to retreat after Fridays big falls. In Europe, Spanish regional elections have done little to impact the EUR which traded 1.0350 and the GBP 1.6000.
Eurozone Debt to GDP rose to 87.3% which is closing fast upon the magical 100% which has lead to many individual national crises. In the US, markets were lower after further weak Corporate earnings and confidence on the slide. The focus is on the fast approaching Presidential Elections and the final Presidential debate overnight.
In Asia the mood was set with deteriorating Trade data from Japan with Exports declining over 10% and Imports on the rise.
In Australia, the Government has released a mid-year Budget update early to avoid inclusion of declining revenues form an economy impacting by falling global demand. The AUD held 1.0300 after the announcement, although does look vulnerable to the Global instability. The KIWI continues to trade around the 0.8150 levels.
Focus today will be political in Europe and especially the US! For more on Collinson FX and market information see:
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