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Collinson FX Market Commentary- January 24, 2014 - Party over in China

by Collinson FX on 25 Jan 2014
Auckland 18ft Skiff Championships - December 2013 © Richard Gladwell www.richardgladwell.com

Collinson FX market Commentary: January 24, 2014, 2013

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Equity markets tumbled overnight with fears that the party may be over in China and with the Fed tapering, so to in US equities. The waves of liquidity flooding markets has inflated share markets and multiples of earnings suggest a bubble.

The flash Manufacturing PMI in China came in under 50 reflecting a contraction in Manufacturing frightening markets and sending shares lower globally. The immediate impact was to hit the AUD hard due to dependence on Chinese demand for commodities. The AUD crashed below 0.8800 and looks set to test lows.

The KIWI followed the lead from across the Tasman, drifting back below 0.8300. This was not reflected in the EUR which jumped to 1.3680 after the PMI data showed improvement in Manufacturing and Services in Germany, France and the overall ECB..

The GBP followed the suggested European recovery, rising back to 1.6625. US House Prices and Existing Home Sales continued to improve slowly but this news was not enough to save market fears.

Expect more vulnerability on markets and watch Bond Prices and Commodities to drive currencies.


Collinson FX market Commentary: January 23, 2014, 2013

Markets were fairly static with no major economic releases overnight. The avalanche of data will be triggered tonight with a veritable plethora.

The EUR was static, trading 1.3550, but the GBP jumped a big figure to 1.6575. UK Unemployment fell to 7.1%, sparking speculation that interest rates may have turned, and rises may be in the tea leaves? Australian consumer confidence fell 1.7% but inflation is on the rise.

The CPI rose to 2.7%, from 2.2%, boosting prospects of interest rate rises. This is not good news, as this is the awakening of the sleeping giant. Inflation is now welcomed as a sign of growth, in many quarters, but should be considered a nefarious cancer on any economy. The news was greeted with a spike in the currency, jumping back to 0.8850, supported by interest rate differentials.

The KIWI held 0.8300, bathing in the OZ limelight, with interesting conundrums rising. Pressures now grow for the Central Banks with inflation raising the ugliest of all heads, but rising interest rates may kill anaemic growth?! The dilemma continues, but much will be determined by US economic data, as is the norm.


Collinson FX market Commentary: January 22, 2014, 2013
US markets reopened after the long week end with little to cheer about. There was no significant economic data releases to drive market direction so the focus fell to earnings, which disappointed.

Earnings missing expectations takes the wind out of an over valued equity market, fueled by extreme monetary policy. Failure to provide earnings for over valued stocks merely confirms the bubble. This did not assist the progress of the Dollar with the EUR moving to 1.3550 and the GBP back to 1.6475.

European markets were buoyed by strong ZEW Economic Sentiment reports in Germany and the Eurozone. The economic sentiment report raced to 41.2 from 32.4 in Germany and charged from 68.3 to 73.3 across the single market. The good news from Europe may be short lived with little in the way of solid data to support a substantial rally.

The commodity currencies took advantage of the flagging Dollar with the KIWI bursting aggressively through 0.8300, as a slightly higher inflation number trumpets interest rate hikes again , and the AUD managing to breach 0.8800. Economic data releases across Asia, Europe and the US grow in momentum, as the week progresses, and this will drive currency direction.


Collinson FX market Commentary: January 21, 2014, 2013

US markets were closed for the MLK Holiday, so we saw little action in the markets, which is likely to continue until at least Wednesday when the river of economic data commences.

The EUR was steady, trading 1.3550, and the GBP 1.6425. European markets also remained steady, despite some tremors from Asia. Chinese economic data disappointed with GDP slipping from 7.8% to 7.7%. Industrial Production also slowed, falling from the previous 10% growth rate, back to 9.7%. A slow down in Asian markets is not wholly unexpected but the slack, globally, is expected to be taken up by the developed economies.

The AUD hit four year lows with the disappointing data from China but recovered to open around 0.8800. The KIWI also came under pressure, with local House Prices contracting 1%, reversing the recent explosion in prices and sales.

The NZD also recovered with European markets and will open around 0.8250. A building crescendo of economic data releases and the impact on Central Bank Monetary Policy will drive the remainder of the week.

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