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FX Day Trading - 11 October 2011
Euro crisis officially over
Investors have complete faith in Merkozy plan
Whatever it is
Six years ago the Labour government instituted a test for would-be immigrants on "Life in the UK", covering such essentials as where the Scouse dialect is spoken and how to find a dentist.
The coalition wants to take things a stage further by including a quiz on British history. Applied correctly it could weed out the vast majority of applicants: On what date did the Charge of the Light Brigade take place? Near which village did it happen? Name twenty of the main participants.
The EU might consider a similar test for membership of the euro: What was the main purpose of the Treaty of Paris in 1951? Why are world wars bad for the economy and damaging to the infrastructure of central Europe?
Parliamentarians in Bratislava should be asking themselves these questions as they prepare to sabotage the second Greek bailout. Every other country has ratified the plan, even Germany who will end up footing most of the bill. Slovakia's contribution will be about half a crown and they still begrudge it.
But spread betting investors are not worried. Now that Germany and France are going to boost the capital of all their banks there is nothing to fret about. Never mind where the money is going to come from; investors are as convinced as they ever have been that somebody, at last, is going to do something to sort out the mess.
It was another good day for the euro and for commodity-related currencies and equities. The euro's success came despite a worsening in the Sentix index of investor confidence, which fell from -15.4 to -18.5.
FX spread betting investors did not take a blind bit of notice of the deterioration; the imminent Club Med rescue plan and bank recapitalisation was far more important. As the euro prospered, the pound, the yen and the US dollar fell by the wayside. Who needs a safe haven when the French and German leaders have promised to recapitalise all their banks?
The antipodean dollars managed to keep pace with the euro on Monday but the Canadian dollar felt the drag of its southern neighbour.
The day's unexpected winner was the Swiss franc, which added more than half a cent against the euro. There was no obvious reason for the move in the EUR/CHF spreads, which was doubly surprising in the light of a report from JP Morgan.
The bank speculates that the Swiss National Bank, flush with the success of its efforts to hold the euro/franc exchange rate above 1.20, will shift the goalposts to 1.30.
Today's ecostats opened up with the British Retail Consortium showing a 0.3% annual rise in retail sales and the RICS reporting an unchanged -23 for its housing price balance.
In Australia business confidence improved from -9 to -2 while business conditions flipped from -3 to 2. Consumer confidence in Japan was up by a point and a half at 38.6, its best level since March.
Coming up today are UK industrial and manufacturing production, the DCLG house price index and NIESR's estimate of gross domestic product growth in the third quarter. The day's only other figure is for Canadian housing starts.
Oh, and in case anyone missed the news, the German and French leaders are going to recapitalise all their banks (though it might not be today). Buy euros: half a million sheep can't be wrong.
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'Euro heads Higher in FX Spread Betting on Optimism Over EU Debt Plan', Article by Moneycorp, last update: 11-Oct-11
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