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FX Day Trading - 1 November 2011
Greek referendum idea stuns investors
They will be asked to vote for austerity
But what if they don't?
If you thought the zombies on Halloween were just blokes in fancy dress, think again. Some of them are real. The one who stepped out of the shadows in Athens last night could turn Greece into a land of the living dead.
A week ago Prime Minister George Papandreou agreed with other EU leaders on a hard-fought plan that would keep his country's euro membership alive.
Yesterday evening, in a storyline straight out of a Romero movie, he threw off his disguise and challenged his countrymen to a referendum on the ultimate Hobson's Choice: they could either have their financial eyes ripped out by austerity measures or by the chaos that would follow the total bankruptcy of Greece and the wipe-out of its financial institutions.
Mr Papandreou's proposal to hold a referendum on the EU rescue package was totally unexpected. It blew spread betting investors away. They are unable to imagine any resulting upside for the euro, the Eurozone or the global economy. It was almost as if last Wednesday's milestone agreement had never happened.
Mr Papandreou's announcement came too late to affect European indices spread betting markets but there was a sell-off of shares in North and South America and Far Eastern equities have followed them down this morning. The euro has fallen across the board, three yen down on the day and two cents lower against the US dollar and the pound.
The Australian dollar took a smack this morning after Australian house prices fell by -2.2% in the year to September and the Reserve Bank of Australia unexpectedly lowered its cash rate from 4.75% to 4.5%. See also AUD/USD spread betting.
Sterling had a respectable day, holding its own against the US dollar and gaining ground against the Canadian, Australian and New Zealand dollars.
Its performance was no thanks to Bank of England lending figures. Mortgage approvals were fewer in September while consumer credit debt increased. The average UK household now owes more than £9k excluding the mortgage.
That would be good news if everyone was filling their boots at M&S and Dixons but it seems they are not; they are borrowing to fill the shopping basket and the petrol tank.
The focus will be on the economy today. Nationwide has already announced 0.4% monthly and 0.8% annual increases in its house price index.
At half past nine the first stab at third quarter gross domestic product (GDP) is expected to show growth of 0.3%. At the same time a one-point fall to 50.0 is pencilled in for October's manufacturing sector purchasing managers' index (PMI)
China's manufacturing PMI came out earlier, down by a point and a half at 50.4. Manufacturing PMIs are also due today from Switzerland, Germany, Italy, Euroland and the States. Only the US number is expected to be higher on the month.
There will be strong interest in all of those figures but there will also be another day of serious head-scratching, this time about the possible consequences of Mr Papandreou's appeal to Greek voters to do the right thing. It's like giving turkeys the choice between Christmas and Thanksgiving.
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'AUD/USD Spread Betting Market Lower on RBA Rate Cut', Article by Moneycorp, last update: 1-Nov-11
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