A daily look at the FX markets from Moneycorp.com.
For the latest FX Daily Trading Update see FX Day Trading.
FX Day Trading - 13 July 2010
Circumstances gang up against sterling
Yet it manages to win the day
Spare octopus, anyone?
The word from Oberhausen is that Paul, the psychic cephalopod who beat odds of 256/1 to make correct predictions for eight world cup matches, is to step down. His manager, Verena Bartsch, says he wants to retire at the top of his profession. Critics, however, say the speed of his departure has been driven by damaging revelations in the media.
Today's Daily Mirror alleges that Paul is not, as he claimed, English and also that he has lied about his age. The Mirror headlines its article 'Paul the psychic World Cup octopus "is a fraud"'. Interesting, then, that in the same issue the Mirror urges that 'Paul the octopus should pick Labour party leader'.
Or maybe there is a place for him at one of the ratings agencies. He could do no worse with a mussel in a box than the experts did with horde of quantitative analysts when they dished out AAA ratings to packages of sub-prime mortgages. Nowadays, of course, they can't leave well alone.
To prove it is on the ball, Standard and Poor's warned yesterday that there is 'still a material risk' that UK government debt could reach a level' incompatible with the AAA rating'. According to the Dagong Global Credit Rating Co it already has.
In the Chinese firm's first venture into sovereign debt it gives AAA ratings to Norway, Switzerland, Denmark, Singapore, Australia and New Zealand. China, Holland, Germany and Canada get AA+ and the United States rates AA. Britain and France are lumped together with Japan on AA-.
Moody's and S&P currently rate Japan as a double-A risk, their third highest level, but both of them have the country on credit watch after Prime Minister Kan lost control of the upper house at the weekend's election.
That the Japanese yen can perform so well (sometimes) with only an AA rating ought to be a consolation for sterling. But the pound is a delicate flower, prone to shrivelling up in the face of adversity.
When S&P issued its warning yesterday sterling ran behind the sofa. It had done the same thing earlier in the day after the delayed publication of the figures for first quarter gross domestic product (GDP). As expected, GDP expanded by +0.3% in Q1. That was fine. But there was also a surprise in there. Earlier estimates for the peak-to-trough decline in GDP had put the figure at -6.2%. The final revision updated that figure to -6.4%. There was also confirmation that, in volume terms, the 4.9% fall in calendar 2009 was a record annual drop.
Rubbing salt into sterling's wounds was MPC member Adam Posen. He was quoted by a regional newspaper as saying 'There is a chance we could slip back into recession.' Estate agents fear he might be correct: the RICS house price balance fell from 21% to 9% in June. They believe rising supply and falling demand will lead to a renewed decline in prices.
Despite all these tribulations sterling managed make a decent day out of it. It is half a cent lower against the New Zealand dollar (i.e. hardly at all), steady against the yen and firmer against everything else. Thank goodness for efficient markets.
So far this morning we have seen Australian business confidence (as measured by NAB) fall from 5 to 4 and business conditions remain steady at 8. Japanese industrial production increased by a dismal 0.1% in May after falling by the same proportion a month earlier. Production was 20.4% higher on the year. Consumer confidence in Japan improved by a single point to 43.6 with household confidence close behind at 43.5.
German wholesale prices were -0.2% lower in June, 5.1% higher on the year. Swiss producer and import prices were down by -0.4% in June and 0.9% higher over the 12-month period.
There are plenty more data to come including German and Euroland economic sentiment and the Canadian and US trade figures. Britain's contribution will be the CPI and RPI inflation data.
Analysts have not made a particularly good fist of predicting the UK inflation figures in recent months (and neither has the Old Lady).
Their guess today is that the consumer price index - the one that counts - will be up by 3.2% in the year to June. That would be closer to the 2% inflation target than last month's 3.4% but still no cigar for the MPC.
What is also important here, though, is direction. If inflation continues to decline it will fulfil the Bank's prediction and will remove any excuse for higher interest rates in the near future. If it moves higher again the pound will go up in the vague expectation of monetary tightening. Where's an octopus when you need one?
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. Neither Online-Spread-Betting.com nor Moneycorp accepts any responsibility for any use that may be made of the above.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it 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.
'FX Day Trading 13 Jul 2010', Article by Moneycorp, last update: 13-Jul-10
Related articles:
FX Day Trading, 9-Sep-10,
Daily FX Trading updates from Moneycorp – an interesting look at the currency markets where the...see: FX Day Trading
FX Day Trader, 8-Sep-10,
A daily review of the currency markets concentrating on the major Dollar, Yen, Euro and Pound Sterling markets...see: FX Day Trader
FX Day Trading 26 Aug 2010, 26-Aug-10,
FX Day Trading 26 Aug 2010: As far as the online spread betting markets are concerned there seems to be a growing queue of people talking about selling the US dollar in the face of...see: FX Day Trading 26 Aug 2010
FX Day Trading 25 Aug 2010, 25-Aug-10,
FX Day Trading 25 Aug 2010: In forex spread betting, Sterling also confounded its critics yesterday by getting a C in swimming. Despite beginning the day clutching a concrete lifebelt it...see: FX Day Trading 25 Aug 2010
FX Day Trading 24 Aug 2010, 24-Aug-10,
FX Day Trading 24 Aug 2010: Whilst none of the risks listed by Mr Weale is unique to the United Kingdom, the currency judges snapped up the opportunity to take it out on Sterling...see: FX Day Trading 24 Aug 2010
FX Day Trading 23 Aug 2010, 23-Aug-10,
FX Day Trading 23 Aug 2010: What will an Australian coalition government, and one that relies on independents for a majority in the lower house, mean for the Australian Dollar? What it...see: FX Day Trading 23 Aug 2010
FX Day Trading 20 Aug 2010, 20-Aug-10,
FX Day Trading 20 Aug 2010: On Wednesday it was the Monetary Policy Committee minutes that set the ball rolling for Sterling. Yesterday it was a combination of...see: FX Day Trading 20 Aug 2010
FX Day Trading 19 Aug 2010, 19-Aug-10,
FX Day Trading 19 Aug 2010: Canadian wholesale sales might have some impact on the Canadian Dollar FX spread betting market and the Philadelphia Fed's...see: FX Day Trading 19 Aug 2010
FX Day Trading 18 Aug 2010, 18-Aug-10,
FX Day Trading 18 Aug 2010: Compared with Tuesday's London opening, Cable is a cent lower, as is Sterling/Euro. It is one Yen lower and softer across the...see: FX Day Trading 18 Aug 2010
FX Day Trading 17 Aug 2010, 17-Aug-10,
FX Day Trading 17 Aug 2010: The inflation figures will be the most important event for the Sterling spread betting today, even though they have no direct relevance to...see: FX Day Trading 17 Aug 2010
£1 per point: Start trading £1 per point/tick & an initial deposit of £30
Multiple markets: Forex , Commodities, Indices & Equities
Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
(1) The FTSE Rolling Daily Spread is 1 tick during market hours & 4 ticks out of hours. 1 Tick is defined as a full FTSE point. See our Product Information for more details. (2) The above information is correct at time of writing. (3) Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it 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.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
