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FX Day Trading - 28 October 2011
So far so good
EU agreement goes down well with financial markets
How long will the honeymoon last?
Well that's it. The crisis is over. EU leaders have saved the world and there is no longer any cause for concern.
A quick trawl through this morning's news finds the BBC leading with the Turkish earthquake, The Daily Telegraph featuring care for the elderly, The Independent talking about company directors' pay rises, The Times on the Catholic church and The Washington Post fearing a new recession.
Only The Wall Street Journal remains loyal to the biggest story of recent weeks. It provides a timely warning that Wednesday night's agreement in Brussels is not the end of the problem; with a lot more work it could, with a decent helping of good luck, be the beginning of the end.
There has been no such concern in financial spread betting markets though. Investors spent Thursday on a high. They were buying, with only a few exceptions, anything that moved.
Equities, commodities, oil and gold all went higher, as did the antipodean dollars. The euro was an obvious beneficiary, although it did somehow manage to lose half a cent to the Swiss franc. Predictably, the US dollar and the Japanese yen were left on the bench.
Sterling jogged along in the middle of the field, collecting half a yen and the best part of one US cent as it fell by proportionally the same amount in the GBP/EUR spreads.
Among the more important economic indicators were an 11% fall in UK retail sales (CBI figure), provisional quarterly growth of 0.6% for US gross domestic product in Q2, a two-point decline in UK consumer confidence, 0% inflation in Japan and a 4% decline in Japanese industrial production.
The only one of those to make any appreciable difference to exchange rates was the doubling in the pace of US economic growth. It sent the dollar slightly lower because, as everyone knows, any pickup in the US economy reduces demand for the dollar. (Beware of applying this logic to any other currency.)
Today's list of ecostats is short, with US personal incomes and spending and the Michigan index of consumer sentiment. All Europe can offer is Switzerland's leading indicator.
Online spread betting investors spent Thursday on the crest of a wave of relief. Euroland leaders had come up with a credible agreement, roughly in line with expectations, and everyone wanted to believe in it.
Nobody was keen to point a finger at the potential flaws. They did not mention the risk that banks might increase their capital ratios by lending less, rather than taking strings-attached government money. They did not question the prudence of using derivatives to quadruple the size of the bailout fund.
They did not even shudder at the sight of President Sarkozy saying on TV that he would be prepared to accept Chinese money even though he didn't need it, and here was the account number...
There is nothing on today's schedule likely to reverse yesterday's direction and investors will not be desperate to pick a fight at the end of such an eventful week. Have a good weekend.
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The above content does not constitute investment advice, it is provided purely for information purposes and is delivered as a personal view of the writer. Neither the contributing company (or writer) nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the content.
'EU Debt Crisis Relief Rally Sends Online Spread Betting Markets Up', Article by Moneycorp, last update: 28-Oct-11
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