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FX Day Trading - 26 August 2010
US economy grinding to a halt
US economy slows further
German data suggests stronger recovery
If you are dreading/relishing the prospect of lengthy tailbacks delaying your bank holiday visit to the seaside/mother-in-law (delete as appropriate), spare a thought for the poor souls stuck in a 100 kilometre traffic jam in China for the last nine days.
Roadworks are apparently to blame for the jam stretching from Beijing to Inner Mongolia – proving they are not just a British phenomenon. Those caught up in the traffic, largely consisting of trucks carrying freight into Beijing, are reported to have passed their time playing cards. It is not clear whether the Chinese alphabet lends itself to ‘I spy’ but even someone blessed with the patience of a saint will gladly scratch their own eyes out after an hour of that particular torture.
In another parallel with modern Britain, drivers stuck in the jam have complained about locals living near the affected motorway overcharging them for food and drink. Anyone who has had the misfortune of stopping at a UK motorway services will understand completely.
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 continued poor data and the imminent prospect of further quantitative easing. Yet, so far, there has been very little movement.
Whether this is due to the traditional thin trading conditions at this time of year or fear of being caught on the wrong side of the market, it can surely only be a matter of time before poor US data leads to dollar weakness – especially with more encouraging signs of recovery in Europe.
As if to highlight this, data from the US yesterday indicated orders for durable goods increased less than forecast in July and sales of new homes unexpectedly dropped, increasing the risk of a renewed recession. Orders for goods made to last at least three years rose just 0.3% against a consensus estimate of a 2.9% gain. Excluding transportation equipment, demand fell by 3.8% against a predicted 0.6% gain. Other data showed that purchases of new dwellings fell 12% to an annual pace of 276,000 – the weakest since data began in 1963.
The reports indicate capital spending, one of the few bright spots in a weakening economic recovery, is slowing as the second half begins, while a lack of jobs is crippling housing. Mounting signs of a slowdown are increasing pressure on the Federal Reserve to find more ways to spur growth – none of which are likely to be good for those holding dollars.
Earlier in the day, the latest IFO Institute survey showed that German business confidence unexpectedly increased for a fourth month in August to a fresh three-year high, suggesting the economy may not lose as much momentum as some economists forecast. The Institute said its business climate index rose to 106.7 from 106.2 in July, despite a forecast drop to 105.7.
Budget cuts across the euro region and a slowing global recovery may crimp demand for German goods and dampen growth in the second half of the year, but the situation is looking much rosier than in the US. It also gives those spread betting an alternative safe haven play, something not available to them earlier in the year.
There is little to get excited about today with eurozone money supply, Confederation of British Industry realised sales, US weekly jobless figures and US mortgage delinquencies the only data points of note. None of these are important enough to move the market, particularly with all eyes now on tomorrow’s first revisions to Q2 GDP readings from the UK and US.
The expectation is for the UK number to remain unchanged at 1.1%, while the US number is expected to be revised down from 2.4% to 1.5%. Any significant deviation from these forecasts and there may well be sharp movements in thin trading conditions. Drive safely…
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The above content does not constitute investment advice, it is provided purely for information purposes and is delivered as a personal view of the writer. Neither the contributing company (or writer) nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the content.
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 26 Aug 2010', Article by Moneycorp, last update: 26-Aug-10
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