The Financial Fixed Odds update from David Evans, Market Analyst, BetOnMarkets.

Today’s trading session could be chaos according to traders interviewed in the Daily Telegraph (H/T ZeroHedge).

Yesterday the currency markets extended their volatility with the Euro/Dollar spread falling to its lowest levels since 2006.

The main catalyst has been the announcement by the German regulatory authorities that it was banning so called ‘naked’ shorts of Sovereign Credit Default Swaps (CDS).

In plain English, these CDS allow traders to bet on whether a country is going to go bankrupt or not. The were first invented as a kind of insurance for anyone buying government debt, but more recently they have been used by traders to make purely speculative bets on the likelihood of a country such as Greece or the UK defaulting.

On a populist level, the ban is understandable, many politicians blame ‘the wolf pack’ of speculators for bringing Greece and the EU to its knees.

It was hoped that a ban would discourage such speculation and stabilize markets, especially the euro. If that was the aim, it’s failed spectacularly and many are now calling it an act of desperation with the ban completely unenforceable with potentially unknown consequences.

It’s thought people wanting to speculate against Europe have moved shorting the EUR/USD instead of the individual country CDS.

Trading Idea

Traders don’t know what is going to happen on the stock, bond or forex markets today so there could be some volatile swings.

In this situation, a Financial Fixed Odds ‘Breakout’ Trade could be a way forward as the market could spike higher or lower and you still win.

Judging by market’s early moves this morning, traders are currently keeping their powder dry and it may be a few days before the whales make their move.

Australian Dollar Continues to Fall

This morning the Aussie dollar is continuing its slide as commodities including gold slump on expectations of low future demand with European austerity packages.

Coming up today:

Today’s standout economic announcements include the release of the minutes from the last Bank of England Monitory Policy Committee meeting at 19.30. We have the same release from the US FOMC at 19.00 and US inflation (CPI) at 13.30.

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