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FX Day Trading - 12 September 2011
Euro under fire
European banks under fire
Yen leads the way
Following their meeting in Marseille, the Group of Seven finance ministers and central bankers released a statement even more anodyne than their usual offerings. It was a masterful example of the political art of talking a lot and saying nowt.
G7 ministers tried their hand at creative etymology with a reference to "the flexibilisation of the EFSF", and wheeled out the inevitable admonition that "Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability." More perplexing was an apparently self-contradictory call for "ambitious and growth-friendly fiscal consolidation".
UK spread betting investors had expected little from the G7 meeting so were not disappointed. There seems to be a similar attitude towards the Greek bailout and the euro. It is now more than seven weeks since Euroland leaders allegedly reached an agreement on the flexibilisation of the European Financial Stability Facility yet still nothing seems to be happening, other than Italians going on strike and Greeks being hit with an electricity tax.
The European Central Bank is doing its best to hold the ship together by supporting the price of Spanish and Italian government bonds but the strategy is not only unpopular in Germany but also within the ECB itself. At the end of last week Executive Board member Jürgen Stark resigned. Nobody is suggesting his resignation was intended to demonstrate passionate support for Bank policy.
At the same time reports from Berlin appeared to indicate that Chancellor Merkel is gearing up the country's financial institutions for a default by Greece.
Investors' enthusiasm for European bank shares is at its lowest since the collapse of confidence following the collapse of Lehman Brothers three years ago. The credit ratings of at least three French banks are under threat because of their exposure to Greek debt. With all that kicking over, it was no surprise to see the euro struggling at the end of last week and in the Far East this morning.
Looking at Euro spread betting markets, compared with Friday's opening levels the euro is down by three and a half cents against the US dollar, two cents against the pound and more than three yen.
The yen has been the best performer, touching a ten-year high against the euro and coming within three yen of an all-time high against sterling. It starts today just half a yen away from last month's record high against the US dollar.
The Swiss franc has been going the other way, losing two cents to the dollar and one and a half to the pound since Friday morning. At least for now, the market is unwilling to take on the Swiss National Bank, which said last week that it would intervene "in unlimited quantities" to keep the euro/Swiss franc exchange rate above 1.20.
Friday's economic statistics came and went largely unnoticed by investors. UK producer prices were roughly where they should have been and the -5,500 fall in Canadian employment was not big enough to hurt (though it did not help the Loonie).
Other than Italian industrial production there are no ecostats on today's agenda, so expect investors to concentrate on the imminent demise of the euro.
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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.
'Euro/Swiss Franc Spreads Find Support in SNB Currency Peg Intervention', Article by Moneycorp, last update: 12-Sep-11
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