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FX Day Trading - 16 August 2011
German GDP grew by nugatory 0.1% in Q2
Pan-Euroland figures this morning
UK inflation projected at 4.3% in July
In an effort to burnish his green credentials, President Obama is travelling by bus across three of America's Midwestern states.
Rather than usurp the places of people on a Greyhound the president has persuaded taxpayers to buy him his own coach, armour it, equip it with missiles and feed it with petrol at a rate of 5mpg.
Although the trip is supposed to be presidential – not political – in nature, it is impossible to imagine that at least some part of his attention will not be focused on next November's election.
By the same token, it is easy to believe that Angela Merkel and Nicolas Sarkozy will have political survival in mind during their discussions in Paris today. They are supposed to be applying yet another layer of sticking plaster to the 'stable euro' project, which has stalled since the "breakthrough" agreement between EU leaders four weeks ago in Brussels.
But one of them, Frau Merkel, will be negotiating with tied hands. Her Free Democrat coalition partners have warned that they will withdraw their support if she speaks in favour of the multi-national "Eurobonds" which many outside Germany believe are essential to solve the southern debt crisis.
Mr Sarkozy will be arguing in favour of Eurobonds, not least because of the protection they would provide to his own country against high borrowing costs.
Ahead of the meeting, financial spread betting investors were mildly optimistic that something good would come out of it. The euro was Monday's best performer, unhampered by weak economic data or new bad news.
That picture has changed this morning with the release of German figures for second quarter gross domestic product. Having been expected to grow by 0.5%, German GDP in fact expanded by an almost imperceptible 0.1% and growth in Q1 was revised down from 1.5% to 1.3%.
Taking the weak German outcome together with France's zero growth in Q2, it seems unlikely that the analysts' consensus of 0.3% growth for Euroland as a whole will be met when the data come out at ten o'clock this morning.
Before that, Britain releases its CPI and RPI data for July. CPI inflation is forecast to have ticked up from 4.2% to 4.3%. At that level it ought not to have any impact on the pound - dollar spread betting market, especially in view of the institutional lack of connection between inflation and interest rates.
Sterling did receive a leg-up yesterday though, after a comment from Monetary Policy Committee member David Miles. Mr Miles, who tends to side with the doves, said in an interview that although there might be circumstances under which more quantitative easing would be appropriate, "that's not how I've seen things thus far".
The assumption is that tomorrow's MPC minutes will still show just the one vote for more QE.
It will be all eyes on the euro currency spreads today, first to see just how weak Euroland growth was in Q2, then to hear what new agreement the French and German leaders have been able to cobble together. Both events will be important to the single currency.
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'Euro Currency Spreads Under Pressure Ahead of Franco German Summit', Article by Moneycorp, last update: 16-Aug-11
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