That was the week that was – Stocks got the jitters, Britain lost its Triple A and the Aussie got its Mojo back
Here is our take on the economy and markets over the past week and its impact on the approximately 90 markets we watch and which can be traded at either our Sponsor VantageFX or at AVATrade.
The highlights for the week were:
- The FOMC told us that they are a little concerned about the potential for their bond buying program to be the cause of market instability and are actively discussing when and how to withdraw stimulus when they need to. Of course that doesn’t mean they will start to withdraw in March but the discussion is being held and Joe La Vorgna of Deutsche Bank reckons the withdrawal will come around mid year. The chance of a top in stocks or a topping period/pattern have grown materially.
- Britain lost its AAA rating from Moodysb on Friday with a one notch down grade from Aaa to Aa1 - the Pound has been under pressure for weeks now and we are targeting a move to 1.42 in time.
- There is a dichotomy between sentiment and reality in Europe at present. German sentiment surveys seem to belie the flow of weak data we continue to see flow from the biggest economy in Europe where the Markei Services PMI and Q4 GDP were both weak but the IFO business climate survey was strong. Hope over reality? The risks are in a few months if the recent weakness continues in Europe.
- The RBA Governor Stevens was pretty upbeat on the Australian economy really with his address to the parliamentary economics committee. While he did say that the chances of a cut were more likely than a hike he seemed to say that it will only be if data undershoots the RBA forecasts that an easing would occur. So he’s put his credibility on the line. NAB reckons he is still going to ease while the CBA seems less inclined to think so.
- Stevens comments on interest rates and the Aussie dollar also kicked the battler higher and it was the best performer against the US dollar this week and made ground on all the Major Aussie dollar crosses. His hands off comments with regard to intervention and specifically his comment that you would have to think the Aussie was seriously overvalued to intervene was an indication both that the RBA is in no mood for intervening nor that it thinks the Aussie is overvalued. Buyers were found again in the low 1.02 region and AUD ended the week at 1.0320.
- Speaking of intervention RBNZ Governor Wheeler did his best David impression against the Global FX Markets Goliath threatening intervention. MMMMM…sure thing we’ll just close our doors lock our currency to the Aussie and then print to our hearts content. But the market believed him and the Kiwi lost nearly 1% on the week.
- The EURO touched a six week low against the US dollar as the market woke up to the reality that while the acute phase of the crisis is behind us the economic consequences of the peace in the markets are yet to be worked through. The rather small repayment amount from European banks of the LTRO on Friday was but a further reminder of the stresses that remain within Europe as was the weak Q$ GDP and the EC’s release of a forecast for more contraction for the Euro Zone in 2013.
- Commodities also reacted to a strong US dollar and weaker economic data with copper, Nymex, Brent and Heating Oils all lower along with gold and Silver.
- On Equity markets even though the S&P finished the week on a better note after the Wednesday/Thursday 1.9% sell off the chances of a top in stocks is high – here is the daily chart of the S&P showing the outlook. Last week’s low needs to hold
Now a look at the market’s performance over the week:
Top 10 rises and falls in markets for the week
If this chart isn’t a lesson in diversity in your trading portfolio then we don’t know what is – plenty of opportunities to make money long and short this week.
Global FX Big 14 Foreign Exchange Markets
USD Strength and GBP Weakness are the story of the weak
Aussie Dollar Crosses
The Aussie got its Mojo back this week pushing higher across the board
Euro and Sterling Crosses
The loss of AAA is hurting Sterling which is already under intense pressure
Global Equity Indices
Chinese shares didn’t have a great start to the year of the Snake.
Commodity Market Performance
A better US dollar and weaker data saw many commodities under pressure
MT4 Tradeable Bonds
Weaker data equals better bond prices.
Have a great day.
Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, this blog is for information only and does not constitute advice. Neither Greg McKenna nor www.globalfx.com.au has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.