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FX Day Trading - 31 May 2011
Ireland needs a second bailout
No it doesn't
Euroland inflation today
"Crisis? What crisis?" FIFA president-for-life Sepp Blatter says people are wrong to think corruption had anything to do with the award of the 2034 World Cup to Myanmar just because a few envelopes of cash were handed around. Clara Aguilera, Spain's minister of cucumbers, says her country's products are as straight as a die and absolutely not poisonous; it is simply coincidence that Germans who eat them are dropping like flies. Italy's self-styled stud muffin and prime minister
Silvio Berlusconi says it is nonsense to suggest that a sleaze-ball image had anything to do with his party's electoral defeat in Milan at the weekend. Enda Kenny, Ireland's Taoiseach and master speech-writer, says his transport minister Leo Varadkar was misrepresenting the situation when he said Ireland was lining up behind Greece for a second bailout; Dublin will be back in the bond market in its own right and picking up 10-year money at 3% by the end of next year.
In an interview with the Sunday Times Mr Varadkar had said it was unlikely that Ireland would be able to fund itself in the open market next year and that it may struggle to do so in 2013. It may therefore need an additional emergency loan from the EU/ECB/IMF triumvirate. It was all true, of course, but it was perhaps injudicious of Mr Varadkar, who has a reputation for leading with his mouth, to say so with such clarity.
The story could have been damaging to the euro had it not been for subsequent news that EU leaders would decide on an extension of Greece's bailout package by the end of June.
According to Jean-Claude Juncker, head of the eurozone finance ministers' group, there will not be a "total restructuring" of Greek government debt. When he has received the "final judgment" of inspectors from the EU, the ECB and the IMF his group will be able to come up with a solution that will satisfy the IMF. And that will be it; job cracked.
Financial spread betting investors in the Far East seem to have swallowed it hook, line and sinker this morning. They were helped in their belief by another story that, as the Wall Street Journal put it: "Germany is considering dropping its push for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for Greece." The WSJ quoted "people familiar with the matter" as its source.
It was the first real move since Friday morning. With London and New York on holiday there was not a whole lot going on yesterday and there had not been much of substance in Friday's economic news. German inflation and US personal income and spending data were spot on forecasters' targets. A sharper than expected -11.6% fall in US pending home sales was offset by a bigger than expected four and a half point improvement in the Michigan consumer confidence index.
Yesterday the New Zealand dollar benefited from an April trade surplus nearly twice the expected size at $1.113 billion. The Canadian dollar took on water after first quarter gross domestic product in Canada came in slightly below forecast at 3.9% and Q4 2010 GDP was revised down from 3.3% to 3.1%. The damage was not lasting; the Loonie regained all the lost ground and more.
Overnight there was good news and bad news for the yen. Japanese industrial production went up by 1.0% in April after collapsing by -15.5% the previous month. A couple of hours later Moody's announced it was putting Japanese government debt under review for a possible downgrade from its current level of Aa2.
The Australian dollar fell back after news that building permits were down by -11.5% in the year to April and by -1.3% on the month. Rising interest rates, high prices and possible new taxes have taken the wind out of the property market's sails. Although house prices in Sydney rose by 0.5% in the 12 months to April, prices in Perth were down by -7.3%.
Europe's opening shots this morning came with Switzerland reporting GDP growth of 0.3% and Germany showing a 0.6% monthly increase in retail sales.
Yet to come are German and Euroland unemployment and eurozone inflation.
In Canada, the Bank of Canada's policy announcement follows the raw material and industrial product price indices.
There are two private sector indicators from the United States; the Case-Shiller home price index and the Chicago purchasing managers' index.
Not a single UK statistic is to be found on the list so sterling will not have much chance to shine.
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'FX Day Trading 31 May 2011', Article by Moneycorp, last update: 31-May-11
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