Collinson FX Market Commentary: October 18, 2012 - Huge rebound

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Collinson FX market Commentary: October 18, 2012

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The huge rebound in global equity markets continued with a consolidation supported by more good news on the economic front. In the US, Housing Starts jumped by 15% and Building Permits by 11.6% signalling the long awaited precursor to the economic recovery may finally be upon us!? The renewed confidence on the economic front has raised the cause of risk appetite sparking a rally in the currencies. The EUR has broken restraints and leapt to 1.3125 and the GBP to 1.6150. The resurgence is based on a negative as much of the rallies have been.

The poor performance of global economies, mired in debt, have bared witness to the rise of the power of Central Banks. Politicians have failed their constituents by not acting to curb excessive spending resulting in massive deficits. The deficits have resulted in crippling debt which has become the millstone. The overwhelming debt level consumes income previously destined for expenditure for the greater good. Politicians continue to spend more than revenue provides accentuating the short-term nature of the Political cycle.

The failure of leaders to act within their means has resulted in Central Bankers intervening, acting Monetarily to counter fiscal ineptitude. The expansion of liquidity has eroded citizens wealth by destroying the currency and reducing asset values. This has to be, as western countries live beyond their means. The commodity currencies extended recent gains with renewed risk appetite. The AUD has recovered to 1.0375 and the KIWI to 0.8215 fueled by inflated interest rate yields. Irresponsible political leadership has resulted in Central Bank flagrancy which now calls for RBA and RBNZ conformation. Inflated currencies have crippled trade exposed sectors advancing the cause of recalcitrant nations. European developments will continue to undermine markets and be aware of the 'October Factor'.

Emirates Team New Zealand. Day 12 of testing for the team's first AC72. Hauraki Gulf, Auckland. 16/10/2012 - Emirates Team NZ - Day 12 October 16, 2012

Collinson FX market Commentary: October 17, 2012

Markets continued to rally strongly eliminating last weeks losses with a surge in risk appetite. The conception was sparked in Europe with word of a Spanish request for a bailout while Portuguese riot in the streets against austerity measures required from their own bailout!

The German ZEW Economic Sentiment reported an improvement but still sits at minus 11.5. Corporate earnings continued to drive equities north lead by the financials. Citibank rallied after CEO, Pandit, resigned much to the relief of many.

CPI was released in Europe, US and NZ and was benign despite huge rises in cost of living because of the lack in growth. Industrial and Manufacturing Production both increased in the US contradicting previous data and thus added impetus to the rally in equities.

Commodities were mixed despite the strong rally and the AUD drifted to trade 1.0265. NZD was hit with surprising news on inflation which fell to 0.8%. The lack of growth allows speculation that RBNZ will cut rates thus reducing pressures on the currency which fell to 0.8130.

Esimit Europa 2 winner of 44 Barcolana race Photo: © Carlo Borlenghi
Carlo Borlenghi/Luca Butto

Collinson FX market Commentary: October 16, 2012

The markets opened the week stronger putting a week of losses behind and looking at strong economic data and corporate earnings. Chinese CPI slowed as did the PPI which lowered input costs and eased monetary pressures. Exports from China doubled beating expectations and weakening recent trade data.

In Europe, the German Finance Minister refuted a Greek default and espoused the harm of an exit on the EU family. In the US, Retail Sales leapt 1.1% beating expectations and giving risk appetite a boost. This was tempered by the Empire State Manufacturing survey which contracted for the third straight month. The EUR held steady at 1.2940 and the GBP 1.6070.

The weak Manufacturing data hit commodities falling uniformly. The immediate impact on the associated currencies was tempered by the strong data from China. The AUD held 1.0250 and the KIWI 0.8180 with rising Home Loans and Car Sales reflecting a recovery in these major sectors after RBA easing policies beginning to impact. Corporate earnings have been strong, lead by Financials with Citi beating expectations with a free pass from Bond Yield returns.

Look for developments from Europe and economic data and corporate earnings to drive market sentiment in the US. Election fever is rising in the US and the gains by Romney are a positive for markets with Obama ineptitude well and truely exposed.

The second debate tonight may well cement the rise of conservatives with the 'Great Orator' unable to combat mortal questioning!

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