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FX Day Trading - 10 October 2011
Merkel and Sarkozy agree new crisis-resolution plan
Details to follow
Few data today
Health and fitness matters are at the forefront in this morning's papers.
The health of Britain's children will be safeguarded by a new EU regulation which forbids under-eights to blow up balloons in case they swallow them.
The fitness for office of the GP in charge of the defence of the realm has been called into question because of his relationship with a "close friend".
David Knott, a teenager from southeast London, was healthy enough to steal a huge plasma telly during the riots two months ago and fit enough to outrun pursuing police in his wheelchair.
The health and fitness of Europe's banks is a different matter. Dexia is in the process of being broken up and partially nationalised. Rating agency Moody's has downgraded the credit ratings of one Spanish and 11 British banks and building societies.
At the weekend Chancellor Merkel and President Sarkozy announced yet another agreement to sort out the Eurozone financial crisis, this one centring on a recapitalisation of banks at risk to a Greek default (even though, as everyone knows, there will be no default by Greece).
As usual, details of the agreement are hazy but more will be revealed next month. Also as usual, FX spread betting investors have clutched at this latest straw of hope, taking the euro higher in early Far East trade this morning.
It is a welcome rebound for the euro after the knocks it took on Friday evening from a series of downgrades to Italian and Spanish debt and warnings that Portuguese and Belgian ratings could be heading lower too.
The euro had earlier risen (or, more precisely, the US dollar had gone down) after better-than-expected American employment figures. Non-farm payrolls rose by 103k in September and upward adjustments to the previous two months' data added an extra 99k to the tally.
Although 45k of the increase came from a return to work by striking Verizon employees, the numbers were considerably better than the 60k or so that investors had been anticipating.
Paradoxically, the good news for the US economy was not good news for the dollar. It increased investors' appetite for risk and made them less inclined to crave the safety of the dollar and the yen. See also EUR/USD spreads.
Except for the Merkozy effect, this week gets off to a slow start with national holidays in Japan (Health and Sports Day), Canada (Thanksgiving) and the States (Columbus Day). Ecostats will be thin on the ground with nothing more than Germany's balance of trade and the Sentix index of Eurozone investor confidence.
The RICS house price balance comes out at midnight. There are no other UK data, which will probably be a relief to sterling.
The pound has been surprisingly resilient following the Bank of England's announcement on Thursday that it would be indulging in another spot of quantitative easing.
That announcement cost sterling a cent at the time, since when it has made more than a full recovery (doubtless to the disappointment of the Bank). The pound's saving grace is a perception that Britain is keeping its AAA credit rating while all around are losing theirs.
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'EUR/USD Spreads Rise on Better Than Expected US NFP Data', Article by Moneycorp, last update: 10-Oct-11
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