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FX Day Trading - 23 August 2011
Major currencies mostly unchanged
63% of Swiss support intervention
Provisional Euroland PMIs today
It seems that EU leaders have been assisting the Libyan rebels not only with air superiority but also with advice on strategy.
Employing the lessons learnt during their triumph over the southern European debt crisis they came up with a plan for the arrest and detention of Colonel Gaddafi's son and heir. They blamed Saif Al Islam's TV appearance last night on speculation that he was still at liberty.
And that was just about the only speculation going on yesterday. Apart from an upward drift for the Australian and New Zealand dollars there was not a great deal of activity in the FX spread betting market.
After two weeks of turmoil it is perhaps not surprising that spread betting investors were content to let sleeping dogs lie, rather than trading up yet another storm. There were net movements of under half a cent - sometimes well under - for sterling against the euro, the two North American dollars, the yen, the Swiss franc and the South African rand.
In Frankfurt the European Central Bank was still buying government bonds, albeit at a slower pace. Last week it purchased €14 billion of them after buying €22 billion the previous week. The plan is working, even with the reduced spending; 10-year yields on Spanish and Italian government debt remain below 5%.
Economic data were non-existent on Monday and there was little in the news to motivate investors.
Monetary Policy Committee newbie Ben Broadbent was quoted as saying that the economic outlook "has softened since earlier this year" and confessed to having a less hawkish attitude than when he joined the MPC two months ago. The revelation had no impact on sterling because it reflected what is becoming a global tilt towards monetary accommodation and stimulus.
Although in the end it did not move far, there was continued interest in the Swiss franc and the possibility of its linkage to the euro.
On Sunday the Swiss weekly SonntagsZeitung published a poll in which 63% of respondents supported intervention to hold down the franc but only 27% favoured a target for the euro/franc exchange rate. On the face of it, 27% support would not appear to provide critical mass for the constitutional changes necessary for a direct euro peg.
However, the Swiss National Bank will surely see 63% support as ample justification for renewed selling of the franc.
Things will warm up on the statistical front today. Already out is one of the Chinese manufacturing purchasing managers' indices, up by half a point to a near-neutral but still negative 49.8.
Switzerland's trade surplus widened to SFr2.8 billion in July, raising another question mark over the supposed link between the balance of trade and currency strength.
From Germany and Euroland come sentiment surveys and the provisional PMIs.
Canadian retail sales and US new home sales are out after lunch.
This morning's UK contributions are BBA mortgage approvals and the CBI's latest retail sales figure. It isn't exactly a data bonanza but it should lead to more activity than we saw on Monday.
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'Australian Dollar Rises as FX Spread Betting Market Turmoil Ends', Article by Moneycorp, last update: 23-Aug-11
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