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FX Day Trading - 06 January 2012
Euro jitters take hold
UniCredit prepares for euro breakup
US payrolls today
In the Italian ski resort of Cortina it is not the eponymous 1960s Fords that fill the hotel car parks. Instead, there are Lamborghinis, Ferraris, SUVs and other top end cars. Italian tax officials counted 133 of them when they mounted a snap inspection.
They found half the owners declaring incomes of less than €50k a year while a third claimed to be earning under €30k. The taxmen's swoop did boost restaurant turnover though.
When they checked the tills they found takings had more than doubled in the 24 hours since their arrival. There was even better news at luxury shops in the resort, where takings had magically quadrupled.
Such is the scale of the challenge facing Mario Monti and the prime ministers of Europe's other "tax optional" countries.
In Greece and Spain the black economy accounts for 27% and 22%, respectively, of gross domestic product.
The problem for leaders - technocrats and politicians alike - is that austerity hits the wrong targets. It is the "little people" who end up paying, as memorably pointed out by Leona Helmsley before she went to jail for not doing so in 1989.
Spread trading investors are all too well aware that institutionalised tax evasion will be a difficult nut to crack. It is one of the reasons they are nervous about Club Med in particular and the euro in general.
They were worrying again on Thursday. Stoking their concerns were another increase in borrowing costs for the governments of France, Spain and Italy and a rights offer by Italy's UniCredit bank, which seeks to raise €7.5bn of new capital.
UniCredit fanned the flames when it said in its prospectus that one reason for the cash call was that the debt crisis could "worsen" and might result in the reintroduction of national currencies in "one or more Eurozone countries".
However, it was not the sentiment that forex spread betting, it was the fact that a major Euroland bank had felt the need to prepare for it overtly.
Not surprisingly the euro had to endure another day of retreat. EUR/USD conceded a cent and a half, EUR/JPY dropped three quarters of a yen whereas GBP/ EUR rose half a cent.
Economic data from Euroland did little to help, with industrial new orders rising at an annual 1.6%, slower than forecasted, and the producer price index slowing from 5.5% to 5.3%.
Britain - and therefore sterling - did better than expected, topping the monthly table of services sector purchasing managers' indices (PMIs) with a two-point improvement to 54.0. The US figure rose by half a point to 52.6.
The UK stays out of the ecostat fray today. Swiss inflation is likely to be negative again, as are Euroland measures of consumer and industrial confidence, Euroland retail sales and German factory orders.
After lunch the focus will be on North American employment numbers, particularly US non-farm payrolls. The consensus is for 150k jobs to have been created in December, slightly above the average for 2011.
That payrolls number and the Euroland debt crisis will dominate FX thinking. It would not be a total surprise to see some profit-taking on short-euro positions but it cannot be assumed.
Currency Trading and Spread Betting carry a high level of risk to your capital and you can lose more than your initial investment, they may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
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.
'EUR/JPY Spread Betting Market Falls as UniCredit Seeks €7.5bn of New Capital', Article by Moneycorp, last update: 6-Jan-12
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