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Collinson FX Market Commentary- January 29, 2014 - Big Ben's last day

by Collinson FX on 29 Jan 2014
Reaching in the breeze - 2014 Mahurangi Regatta - Classic Yachts January 25, 2014 © Richard Gladwell www.photosport.co.nz

Collinson FX market Commentary: January 29, 2014, 2013

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Ben Bernanke commences his final FOMC meeting, one that has been highlighted by Monetary Expansionism, on an unprecedented scale. The Fed's Balance Sheet has trebled under his watch, as a remedy to the GFC, and politically designed fiscal incompetence. Some credibility must be apportioned, with the blame, for his tapering of the monster that is...QE Infinity.

Consumer Confidence rallied to 80.7 from 77.5 which sparked a recovery rally in equities and pressured the USD lower. The EUR rose to 1.3650 and the GBP 1.6570 after an expected rise in UK growth.

The British GDP rose 2.8%, from 1.9%, signalling a long awaited recovery in the economy despite the drag from the single market. US Equities rebounded from heavy recent losses despite a flat S&P Case Shiller Home Price Index and a flagging Durable Goods Order report. It is likely pressure, to the downside, will resume if the Fed maintains the tapering process.

The AUD gained some ground, rising to just under 0.8800 overnight but has since fallen off to .8750, with appetite for risk on the rise. The NZD also recovered some lost ground, moving back to 0.8250, supported by ever improving economic domestic news.

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Collinson FX market Commentary: January 28, 2014, 2013

Equity markets opened the week vulnerable, after last weeks losses, stemming from fears over the emerging markets and the impact of tapering.

Capital has been pouring out of emerging markets and heading for the perceived strength of the US, which is anticipated to climb in value, as the Fed's tapering program swings into action. Chinese growth has been under pressure, which has impacted commodity prices, accentuated by the rising in the reserve currency.

This has hit the AUD hard, testing lows below 0.8700, although some consolidation is underway, at these levels. The KIWI has been impacted, but not to the extent of the AUD, as Agricultural prices have been fairly resilient.

The NZD has traded around 0.8200, with Auckland closed for Anniversay celebrations and the Australia Day holiday closing markets for the day. US Equities were still in decline with global fears spreading to investors and sentiment was not assisted by New Home Sales crashing a further 7%.

Expectations are high for some GDP growth in the UK and bucked the trend, rising to 1.6575, despite a flailing EUR, trading around 1.3675. The equity correction was always coming, due to the nature of the bubble, and QE tapering appears to be the trigger.

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