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FX Day Trading - 22 August 2011
An emphatic nein for Eurobonds
PSNB near balance in July
Investors twitchy about possible QE3
There is bad news and good news from Libya. Arms inspectors have so far been unable to locate any weapons of mass destruction, but the Transitional Council is adamant that it does not need a bailout.
That is just as well, because the EU is no mood to dish out any more of them. In Germany the mood is especially combative. Chancellor Merkel's desire for greater economic cooperation does not extend to collaboration on jointly-issued euro bonds.
She says they are "exactly the wrong answer" because "they lead us to a debt union and not a stability union". Her comment left commodities spread betting investors to wonder quite what form future economic cooperation might take.
For the moment, everything seems to hinge on the European Central Bank soaking up Club Med government bonds and the Merkozy plan to centralise European investment banking activity in Switzerland through the application of a financial transaction tax.
Not that any of those concerns weighed particularly heavily on the euro on Friday. The single currency was slightly lower against the Swiss franc, but then so was everything else. It edged higher against the US dollar, the pound and the yen.
Other than the ECB's success in keeping Spanish and Italian 10-year bond yields below the emotive 5% level, there was no obviously positive news to support the euro.
As much as anything it was investors' even greater dislike for the US dollar that propped it up. There is a suspicion that the Federal Reserve might opt for a third round of quantitative easing to boost the US economy.
Fed Chairman Ben Bernanke will deliver a speech at the Jackson Hole financial conference on Friday. It was there a year ago that he teed up the second round of asset purchases so there are some who assume he will continue that tradition this week with an announcement about QE3.
Friday's global diet of economic data tended towards the anorexic. The only figures of any consequence were those for UK public sector net borrowing and Canada's consumer price index.
Headline Canadian CPI inflation eased from 3.1% to 2.7% in July, minutely below the forecast 2.8%. However, the core CPI figure was up from 1.3% to 1.6%. Because that is the one the Bank of Canada looks at when it makes its interest rate decisions, the Loonie moved temporarily higher on the news.
Public sector net borrowing in Britain went up by an insignificant £20 million in July, considerably less than the half billion or so that investors were expecting. It was a good result but not good enough to lift sterling.
Today's ecostat agenda is not just sparsely-populated; with the exception of Dutch consumer spending and Russia's monthly gross domestic product figure, it is bereft of content.
That lack of statistical stimulus could either mean a day of unprecedented calm in financial spread betting markets, or one of renewed panic with another record high for gold. The capture of Gadafi père would help the case for the former.
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'Forex Spreads: Swiss Franc and Euro Strengthen as Dollar Tumbles', Article by Moneycorp, last update: 22-Aug-11
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