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FX Day Trading - 12 August 2011
A Swiss-euro peg?
They have not ruled it out
Nothing else moving
And so it continues. Politicians are falling over themselves to make difficult decisions in response to the latest front-page headlines.
In Britain the prime minister has banned balaclavas and is considering a petition that calls for rioters to be thrown out of their homes and deprived of food.
In France, Italy, Spain and Belgium they have banned the short-selling of certain financial shares. In time-honoured Euroland tradition each of the four countries has a different list of prohibited stocks so Frenchmen can short Santander and Spaniards can plunge Credit Agricole.
Naïvely, the new rule omits to address options, so anybody can create a synthetic short position by selling calls and buying puts.
In Switzerland, according to the Tages-Anzeiger daily, the authorities are flirting with the idea of pegging their currency to the euro. The franc has strengthened by nearly a third since the beginning of the year, damaging the competitiveness of Swiss businesses and perplexing the Swiss National Bank, which has tried almost every trick in the book to hold it down.
A euro peg would have obvious consequences for Swiss interest rates and inflation. It would also be a tough idea to sell to the electorate, who would have to approve a change to the constitution.
Nevertheless, the euro/Swiss fix was the only idea in town yesterday so investors used the story as an excuse to take some profits on their long-franc positions, taking the currency three cents lower against the US dollar, four cents down against the euro and knocking five cents off its sterling value.
The Swiss franc was the only mover in what was otherwise a relatively static day for the FX market. The pound edged higher by half a yen and half a euro cent. It starts today almost unchanged against just about every dollar you can think of.
Online spread betting investors were more interested in the gyrations of equity markets than they were in the widening of US and Canadian trade deficits or the better-than-expected US weekly jobless numbers.
Earlier this morning a 3.8% jump in Japanese industrial production was very similar to the previous month's performance, reflecting a continuing recovery from the post-earthquake dip.
Unfortunately-timed figures for French gross domestic product showed expansion of 1.6% in the year to end-June but zero growth in the second quarter.
If equities remain on an even keel today investors may pay attention to Euroland industrial production, US retail sales and the provisional Michigan index of consumer sentiment.
They may also remember that, prior to this last week's extreme volatility, the subjects that most concerned them were southern European sovereign debt and Washington's growing obsession with party-political ideology.
Most of all though, investors will be hoping for a quiet day and a decent night's sleep with no alarm to go off in the morning. Have a good weekend.
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.
'Euro/Swiss Franc Spreads Climb Higher on Pegging Rumours', Article by Moneycorp, last update: 12-Aug-11
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