Collinson FX Market Commentary: 29 May 2012 - ANZAC dollars lift

Pic of the Day Paul Snow-Hansen and Jason Saunders - 470 mixed fleet, Day three, May 24th 2012. Delta Lloyd Regatta

Collinson FX market Commentary: 29 May 2012

Markets across Europe and the US were closed for a long weekend so there was very thin volume in the remaining trading markets. In China, the Leading Index, drifted lower fueling belief in the slowing growth in China and across the global economy.

In Europe, markets tried to decipher the growing crises evolving in Spain. The Spanish Government has indicated it may attempt to use Sovereign Debt funds to bailout the Spanish Banks. Bankia is the fourth largest bank and has been nationalised because of exposure to toxic residential mortgage debt. It appears that others will follow and the capacity of the Government to provide the necessary funds is doubtful.

In some capacity, the ECB must print money and support the Spanish Government and the Banks in direct contravention of EU law! The EUR held above the 1.2500 mark and the GBP 1.5680.

US Markets were closed for the Memorial Day long weekend so now all attention will turn to the markets reopening tonight.

The Commodity currencies regained some ground with reports from Greece that the Pro-Bailout parties look to be in the ascendency. Support for Greek membership of the EU is growing, as realisation dawns on their prospects without the EU bailout funds.

The AUD rallied to 0.9850 and the KIWI regained 0.7600. Europe will continue to dominate market direction as Spanish Bonds again reach critical tipping levels.

Collinson FX market Commentary: 28 May 2012

Markets closed the week a little shell shocked after more turmoil in Europe.

The Debt/Deficit crises spread to Spain with one of the largest Banks (Bankia) requesting a $23 Billion Government Bailout.

S&P added to the mess by downgrading further Spanish Banks. This crises may well spread across other European Banks with runs likely.

Plans are now afoot to ring-fence the spread of contagion and prepare for the exit of the Greeks. The precedent would then be set and it will be who stays and who goes.

The single currency dipped below 1.2500 looking extremely vulnerable with Greek elections not due until June 17th.

The instability has shattered market confidence and now economic data is starting to reflect this. The commodity currencies stabilised just above lows with the KIWI 0.7520 and the AUD 0.9750.

The new week will focus on Europe and the Banks and a close look at US economic reports. Housing and Employment will be key. The start will be slow with US markets closed for the Memorial Day long Weekend.


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