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FX Day Trading - 24 November 2011
Investors spurn German government bonds
Less than two thirds' cover for 10-year issue
First revision to UK Q3 GDP today
President Obama's Pilate-like detachment from the deficit-reduction process left him with time yesterday to follow what Americans refer to as a tradition and what the Old World would describe as a modern habit.
In 1989 the first President Bush took it upon himself to officially pardon a turkey presented to him by the National Turkey Federation.
History does not record the crime for which the original bird was forgiven but successive presidents have sought out culpable poultry ever since, parading them annually on the White House lawn in a photo-op demonstration of generosity and compassion.
Chancellor Merkel might wish to consider something along similar lines to balance her unsympathetic characterisation, perhaps a reprieve for investors sentenced to death for not supporting a German government bond auction.
There were plenty of them at it yesterday, staying away in droves when they were supposed to be stumping up the cash for €6bn of ten-year bunds. Germany's Finanzagentur was horrified to receive bids for less than two thirds of the issue.
It was not the first time this has happened – one in five bund auctions has not been fully covered in the last couple of years – but the timing and scale were another blow to confidence in the euro.
With every other country from Greece to France facing higher interest payments on its borrowings, Germany had held itself up as a paragon of the creditworthiness to which lesser nations should aspire.
Wednesday's failed auction might not have affected Germany's credit status but it was a huge custard pie in Berlin's face and it spooked financial spread betting markets. If investors will not lend to Germany, what chance do the others have?
The EUR/GBP and EUR/USD spreads took a swift half-cent dive. Sterling had been unaffected half an hour earlier when the minutes of November's Monetary Policy Committee meeting revealed no urgency for a further round of asset purchases.
Although the subject cropped up ten times in the minutes, the sensation was that it would be another three months before serious consideration would be given to an extension of the £275bn already in progress.
Only one UK economic statistic appeared, showing mortgage approvals by BBA members rising by 6.6% in October.
Provisional purchasing managers' indices for Euroland were stuck in the contraction zone below 50. The services sector improved by a point to 47.8 while manufacturing was half a point softer at 46.4. Industrial new orders for the Eurozone were a bit of a disaster, falling by -6.4% in October and up by a pathetic 1.6% on the year.
In the States personal incomes and spending figures were close to forecast, as were weekly jobless claims. Durable goods orders were down by a monthly -0.7%.
Today brings the first revision to UK third quarter gross domestic product and confidence measures from Holland, Germany and Italy.
It being Thanksgiving Day in the States there are no US statistics other than that a provisional 91% of Americans will be eating turkey. The holiday is likely to dampen activity today and tomorrow.
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'Disappointing German Bond Auction Sends EUR/GBP Spreads Lower', Article by Moneycorp, last update: 24-Nov-11
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