Collinson FX Market Commentary: April 9, 2013 - KIWI fares well

Elliott 7’s - 2013 Auckland Cup, Day 3

Collinson FX market Commentary: April 9, 2013

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Markets were steady overnight as the US embarks on Earnings season with the traditional release of Alcoa after the bell.

After stella earnings for a number of quarters, expectations are low which may allow for some upside with any positive surprises. Equity markets recovered from Fridays US Jobs shock, with the Bank of Japan embarking on its own unprecedented QE.

The promise of a massive extension of the Central Banks balance sheet will give huge impetus to the equity markets and allow the Yen to weaken, stimulating trade growth. Of course this raises the stakes in the 'currency wars' and the fight to the bottom. The EUR held ground around the 1.3000 and the GBP 1.5250 with a small rise in German Industrial Production despite a fall in EU investor Confidence. The AUD regained 1.0400 after a deal was signed by the PM with China to allow the direct trade of the AUD with the RMB.

This should allow for the enhancement of bilateral trade although the actual trading mechanism will be interesting as the Chinese currency remains fixed while the AUD is floating. Locally Holden announced further layoffs disappointing many as the reality of a high cost economy continues to manifest throughout the Manufacturing sector.

The KIWI tested just under 0.8450 faring well in the face of debasement of major, measured currencies. The fear of inflationary bubbles has prevented Central Banks in the higher yielding countries to enter the battle to the bottom but there is scope to act.

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