Collinson FX Market Commentary: July 10, 2012 - EU talk fest resumes

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Collinson FX market Commentary: July 10, 2012

The earnings season commences after the closing bell in New York with Alcoa. Alcoa surprised markets last go around but will be under extreme pressure with aluminium prices crashing globally and electricity input costs blowing out.This has immediate impact on Aluminium production closures, as experienced in Australia, exasperated by the implementation of the all new Carbon Tax!

Equity markets fell as EU Finance Ministers gather for yet another talk fest to solve the EU debt crises, and more particularly, the single currency. The EUR was trading around lows at 1.2300, under extreme pressure, as Spanish Bonds hit trigger point. Bonds broke through the bailout trigger level of 7% which signalled the bailout of fellow PIIGS nations. Corporate Earnings have been stellar recently but the weaker economic data of late, may start to impact.

The Chinese CPI fell to 2.2% and PPI dropped 2.1%, reflecting a big fall off in demand and growth. The Chinese have acted, cutting interest rates twice in the last couple of weeks. This could be interpreted as panic as the EU crises impacts demand and production. Commodity prices rose, after the Chinese cuts were expected to spike demand for commodities although risk aversion undermined gains in the AUD.

The AUD dipped below 1.0200 with Job advertisements falling. The KIWI followed suit now trading 0.7950. The European crises continues to dominate markets and it would need some fairly radical news to influence sentiment otherwise.

There is no short term fix for Europe, hence the crises continues to unfold and undermine global markets. The US is suffering and the Presidential Election campaign will ensure no radical economic reactionary moves to rectify the situation.

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