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

The big announcement today is the UK’s emergency budget at 12.30pm.

This is a news item that is likely to have a huge impact on the pound today, especially the Pound/Dollar spreads .

Some expected measures such as the VAT hike have been leaked, but what the markets want to see is a hard hitting budget that will make serious inroads into the UK’s fiscal deficit. The UK’s credit rating is at risk should George Osborne be perceived to have not gone far enough.

The WSJ sums up the situation as: “…And the new UK government may wish to reduce the size of the state dramatically, but too much of the UK economy now is the state. It’s going to take a very long time to cut it back, as it will across Europe, where austerity now rules”.

In these volatile times, investors tend to cheer signs that we are “getting back to normal” after an extraordinary last couple of years. This is odd because they really don’t want that. A return to “normal” would just be the trailer for Credit Crunch 2.

They should, rather, cheer efforts at rebalancing, and hope that World economies can wait for the snail’s pace politics will be imposed on them. There’s really is no Plan B.

One way to play the budget would be with a Financial Fixed Odds Breakout Trade on the Euro/Pound to isolate the pound movements away from general risk on/risk aversion in the market.

You can currently get a return of 149% on a Breakout Trade predicting that the EUR/GBP will touch either £0.82 or £0.84 before the close on the 23 June. Note that you will lose 100% of your trade if that does not happen.

An alternative strategy would be to wait for the initial reaction then trade in the opposite direction as the dust settles. Often there is a knee jerk reaction to the budget then a secondary reaction as the fine print is revealed. At least that was the case with the previous government’s budgets.

Today’s Market Trends

This morning there’s a general weakening in the euro, especially against the Swiss Franc with the Euro/Swiss Franc spreads making a fresh record low today, trading down 0.35%.

The Swiss Franc has accumulated steadily since the Swiss National Bank announced it was scaling back its currency interventions, allowing the Franc to push to the higher levels.

Without the central bank interventions, we could see more dislocation between the Euro and the Swissy.

Gold is also trading higher after being hit for six yesterday, trading well below its record high of $1,265.

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