Collinson FX Market Commentary: July 24, 2012 - Euros hit panic button

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Collinson FX market Commentary: July 24, 2012

European markets hit the panic button with a freeze on short selling. This is a red flag and was reflected in equity and bond markets. Spanish and Italian bonds hit new highs with spreads at record levels. US and German bonds plunged with the panic flight to safety with short dated bonds reaching negative yields in some quarters. It appears that the EU is fast approaching critical levels and just now cut Greece loose in the vain hope of saving Spain and Italy.

Realisation must be nigh that the single currency is disfunctional and must now be abandoned in its current form. It may be the Germans leave and and sacrifice the advantage of a weak currency for economic stability. The price of the EUR is far to high a political price to pay for responsible citizens. EU consumer confidence fell further to 21.6 reflecting the serious doubts held by the citizens.

The US followed European markets although equities rallied on the close after the Chicago Fed shows national activity continued to decline. On the corporate earnings front Maccers missed expectations meaning that even the consumers stomachs are beginning to turn.

The higher interest rate yields provided by the AUD failed to find support as risk outweighed greed. The AUD fell to 1.0280 and the KIWI dipped below 0.7900. Technicals now point to the edge of the cliff and if these levels are breached then we have major market adjustments.

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Collinson FX market Commentary: July 23, 2012

Equity markets gave up some of the week's gains after more fears over the European debt crises spread across global markets. The focus remains on Spain as EU Finance Ministers approved the Bail Out package for Spanish Banks.

The lack of EURO's seems to spook markets in the more traditional banking run scares. Valencia has indicated it will seek Government Bailout and now the focus will be on the necessity for an additional Sovereign Bail Out. The Greek debacle will also return to the fore with further bailout advances due in August and their failure to meet austerity requirements. The departure of Greece from the Euro may release some pressure although the fundamental dis-functionality remains.

China has indicated intervention to prevent real estate speculation with the economic slowdown now looking to prick the bubble. US Markets fell with little economic news allowing the focus to revert to Europe.

Commodities drifted lower with demand pushing the AUD back to 1,0370 and the KIWI back under 0.8000. The EUR continued lower to 1.2160 after the Spanish 10 year bonds hit 7.27% threatening the very existence of the single currency.

Markets will remain attentive of the EU debt crises while looking closely at US Housing and GDP growth.

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