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FX Day Trading - 1 Mar 2010
GDP Higher, Pound Lower
A Lose-Lose Day for Sterling on Friday
Euro Perkier on Greek Bailout Stories
Defra has drawn up a plan to tighten dog legislation. Among the possibilities under consideration are compulsory microchips, third party insurance and a 'competency test' for owners.
With the I-can't-believe-it's-not-a-recession providing a bleak outlook for public sector jobs, such a test would not only provide re-employment opportunities for outreach counsellors and diversity consultants but would also provide a new and lucrative income stream.
As with motor vehicles, dog handling licences could be arranged by type.
Learners would start with something small at the age of 16. At 18 they could upgrade from a Pekingese to a Spaniel, as long as it was not trained to hunt, and at 21 (with a new test of course) they could progress to a Dalmatian or Labrador.
Allowing a dog to foul the payment or failing to make it beg would mean endorsements at £60 a time. Walking it home from the pub would risk a 12 month ban.
Unfortunately for sterling, investors have entirely failed to appreciate the revenue-generation possibilities offered by the proposal. For some reason they suspect it is simply another smoke-and-mirrors ploy to divert attention from the parlous state of the UK economy.
It was the same story on Friday when the market studiously ignored an improvement in UK consumer confidence and an upward revision to fourth quarter GDP, from +0.1 to +0.3.
Contrary to previous such episodes, the revision had not been hyped unreasonably in advance of the announcement. Expectations were of a +0.2% figure.
But investors were not prepared for a downward revision to third quarter GDP, from -0.2% to -0.3%, nor were they expecting the sharp +1.2% jump in government spending during Q4.
The GDP upgrade did the pound no good whatsoever.
Investors looked right through it to yet another opinion poll showing equal support for the Conservative and Labour parties. Mr Stheeman at the Debt Management Office might not see any danger in a hung parliament but the prospect terrifies investors.
The US dollar's reaction to an upwardly revised fourth quarter GDP figure was less vicious than sterling's plunge but it was nevertheless negative. An annualised growth rate of +5.9% in Q4 was the fastest for six years and represents quarterly growth of +1.4%, miles better than Britain's +0.3% or the euro zone's +0.0%.
Meanwhile, the euro had been moving higher despite a -0.8% fall in Euroland's consumer price index in January. In the case of those moves, as well as for sterling, sentiment was a much stronger driver than the minutiae of historic data.
Sentiment towards the euro is on an upward curve after weeks of anguish about the Greek financial crisis. French finance minister Christine Lagarde confirmed yesterday to Bloomberg that 'European governments were studying ways to assist Greece before EU Affairs Commissioner Ollie Rehn and Greek Prime Minister George Papandreou meet today.'
The suspicion - not yet confirmed officially - is that Germany and France will buy Greek government bonds as long as Athens toughens up measures to slash its budget deficit.
Investors will have two more opportunities to clobber the pound today off the back of February's manufacturing purchasing managers' index and January's money supply, mortgage approvals and net mortgage lending.
Swiss, French, German, Euroland and US PMIs will provide context to the UK number but with the market in its current mood of shoot first, ask questions afterwards, the runes are not auspicious for the pound.
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'FX Day Trading 1 Mar 2010', Article by Moneycorp, last update: 1-Mar-10
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