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FX Day Trading - 28 November 2011
IMF will lend Italy €600bn
Oh no it won't
Eurozone sovereigns need to raise €17bn this week
Certain Army regiments subject their men to "arduous training" in difficult terrain such as the Brecon Beacons.
One exercise involves sending squads of soldiers to a grid reference five or ten miles away, where they will be picked up by helicopter. Upon arrival, an organiser tells them the chopper has broken down: they will have to walk another five miles to a new rendezvous where a truck will be waiting.
They arrive there to hear that the truck is stuck in a ditch ten miles ahead; they must go and help pull it out. When they get there the truck has managed to extract itself and has gone: it is waiting at the original location ten miles back. So off they go to find it.
The exercise trains soldiers to cope with disappointment and tiredness, both of them things they will experience in the field. It also teaches them cynicism; never to rely on what is promised.
One might expect, after two years of this sort of treatment, that the world's spread betting investors would have climbed a similar learning curve. In this column on Friday the assumption was that it had already taken place in financial markets, that a mood of weltschmerz pervaded financial markets, that resignation prevailed.
Not so, it turns out; investors cannot resist being optimistic. Italy's La Stampa newspaper reported yesterday that the International Monetary Fund (IMF) was preparing a bailout package of €600bn for Italy that would avoid the country having to refinance its debt next year.
Not only did investors in the Far East this morning fail to take it with a pinch of salt, they devoured it without even a glance at the allergy warning. The EUR/USD spreads gapped a cent higher and the commodity currencies moved ahead.
And then, a couple of hours before London opened, an organiser told investors that the helicopter had broken down and the truck was in a ditch. As Reuters explained it: "In response to media queries, an IMF spokesperson said: 'There are no discussions with the Italian authorities on a program for IMF financing.'"
It is not inconceivable that the IMF is itself privately trying to gather support for such a scheme but it would need outside help; its own resources only cover two thirds of the quoted sum.
So it's back to the commercial market for Italy, along with Spain, Belgium and France. Together they need to raise €17bn this week. Italy will certainly want to do better than it did on Friday, when it had to pay 6.5% interest on six-month treasury bills.
After two almost statistic-free days at the end of last week there will be another today. The CBI reports on UK retail sales (probably down in November), Gfk on German consumer confidence (slightly softer in December?) and the US Census Bureau reveals October's new home sales (probably unchanged).
No excitement to be had there then; FX spread betting investors will have to wait for the next instalment of the never-ending story that is the euro.*
* Not to be confused with The NeverEnding Story (Wolfgang Petersen, 1984), in which the mythical land of Fantasia desperately needs a hero to save it from destruction.
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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.
'EUR/USD Spreads Jump Higher on Reports of IMF Bailing Out Italy', Article by Moneycorp, last update: 28-Nov-11
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