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Collinson FX Market Commentary- February 8, 2014 - Confused Wall St

by Collinson FX on 9 Feb 2014
Jesse Logan - 2014 Mahurangi Regatta - Classic Yachts January 25, 2014 © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: February 8, 2014

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Non-Farm Payrolls missed expectations and equity markets rebounded defying conventional logic. Non Farm Payrolls added 113,000 Jobs and no upward revision for the previous months disappointment. This should have spooked markets lower but did not!?

Perhaps the belief is that Yellen may consider re-activating QE Infinity and patching the bubble? The USD slumped, adding to the theory that the Fed will hit reverse gear, bailing out share markets. The EUR rallied back to 1.3625 and the GBP regained 1.6400.

Confusion reigns supreme, with Bonds, Commodities and Equities all rising. This is a conundrum and conflicting. It smells of the Fed intervening, thus destroying recent gains in the reserve currency, re-invigorating the bubble in markets. 'Bad news is good news' for Wall Street and detrimental to Main Street.

Commodity gains reflected in the associated currencies with the AUD 0.8950 and the KIWI again approaching 0.8300. Look for Fed Chairman, Yellen, to set the tone for the next weeks trading with economic data lead by US Retail Sales and European Growth.


Collinson FX market Commentary: February 7, 2014
Equity markets rebounded strongly after a couple of days of consolidation. The breakout, to the upside, hinted at an improved Employment number tonight. Expectations are rising for a number around 200,000 and an upward revision of last months shock, 87,000. This has spread confidence, supported by a fall in Weekly Jobless Claims,in the U.S.. The ECB and Bank of England left rates unchanged and ECB President, Draghi, spoke of continued downside risks.

He suggested that 'emerging markets may cloud the economic recovery' but the EUR brushed this off, rising towards 1.3600. Risk appetite grew along with the GBP which traded 1.6350. Australian business confidence rose, from 5 to 8, reinforcing the growing confidence in markets of a continued global recovery.

The AUD now is looking to test the crucial 0.9000 level, which is a big barrier, so looks to be ceiling. The KIWI has continued to book gains after the economy has been touted as a 'rock star' globally! Continued improvement locally, has been manifested by a surging housing market, which may in fact be an achilles heel!?

Risk appetite has supported the NZD to hold above 0.8200 and the Non-Farm Payroll will be the determinant for the close over the weekend.


Collinson FX market Commentary: February 5, 2014
Equity markets stabilised overnight after the dramatic collapse to open the week. Capital flows have hit emerging markets hard, with much moving to the safety of the US and Japan. US 10 year Bond yields have fallen to around 2.63%, reflecting a massive move from equities and a flight to safety. The investment returns are certainly unattractive, so the motivation must be safety and risk aversion.

Yellen's coronation may have spread some doubt into the veracity of the tapering program and this has undermined the faith in the recovering Dollar. The EUR has been steady around 1.3500 and the GBP's recent weakness has been curtailed, holding above 1.6325. The RBA left interest rates unchanged, at 2.5%, asserting there was little prospect of any near term moves.

This was a major boost to the troubled AUD, which jumped nearly two cents, to 0.8930. The KIWI was dragged along for the ride and regained 0.8200 but the cross has fallen nearly three big figures over the last week or so. Local NZ markets will focus on Employment numbers after Finance Minister, Bill English, jaw boned the currency lower on Global TV.

Much of the focus will remain on economic data, for the remainder of the week, with the climax being US Non-Farm Payrolls on Friday.


Collinson FX market Commentary: February 4, 2014

Nervous markets again sparked a sell-off with quick reaction to surprisingly weak ISM Manufacturing data. The huge gains in equities, over the course of the Feds QE programs, had to have an impact and saw an unprecedented rally in markets with the more than tripling of the Fed's balance sheet. Bernanke decided the economy was on the road to recovery and decided to begin tapering QE infinity.

This has caused a correction, by the order of 5%, enhanced by weaker economic data. The ISM Manufacturers survey was expected to be steady but fell from 56.5 to 51.3! This shocked markets and triggered yet another sell-off. The USD remained relatively steady, considered the ordination of the new Fed Chairman, Yellen. The EUR was steady with Manufacturing PMI holding up but the GBP gave up recent gains with a fall in Manufacturing. The EUR held 1.3500, but the GBP dropped over a big figure, to trade around 1.6300.

Chinese Non-Manufacturing PMI fell to 53.4 from 54.6, continuing recent reports, of a slow down in the worlds factory. The AUD remained steady, despite a fall in Building Approvals, which remain robust over the annualised numbers (up 21.8%).

The AUD traded 0.8775 and the KIWI managed to regain 0.8100, surprising many, in light of the fall in risk appetite. Economic data and central bank activity will continue to drive markets with the RBA in action early!

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