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FX Day Trading - 28 September 2011
If you’re going to be two-faced, at least make one of them pretty
News emerged today that a world record has been set by ‘Frank and Louie’ as the longest surviving two-faced cat.
Known as a ‘Janus cat’ – named after the two-faced Roman god of transitions, gates and doorways – the animal, who celebrated his twelfth birthday this month, has two faces with two mouths, two noses and three eyes.
He has an extremely rare condition called craniofacial duplication, a congenital condition resulting from a protein known as sonic hedgehog homolog – clearly named by someone who doesn’t get out very much. As the cat has just one brain, the two faces act in unison.
Since the collapse of Lehman Bros in September 2008, the online spread betting markets seem to have suffered from the same problem. One collective brain with two very different outlooks, and we are currently seeing them fight for supremacy.
One face is a happy, optimistic face and was on top early this week. This saw a rally in the GBP/USD spreads, tracking gains in the euro, as a rise in global stocks boosted risk sentiment and prompted investors to cut bets that the pound would fall.
There was an air of cautious optimism in the City on hopes that European policymakers might finally be working towards a meaningful solution to the debt crisis. As a result, the Aussie dollar, Kiwi dollar and South African rand all outperformed.
FX spread betting investors seem to be gaining a measure of perspective, realising that the prospect of a Greek default is just as likely as it has been for months, the Eurozone is not necessarily any nearer to collapse, and the warnings from various central banks of tough times ahead really didn’t tell anyone anything new.
Having priced in a so much bad news over the last week, some sort of bounce was probably inevitable. However, the other face is never far away.
Analysts warned the rally was probably simply down to an absence of bad news and optimism about a solution to the European debt crisis is likely to be short-lived, given lukewarm German support for the measures currently on the table.
This second, gloomy, pessimistic face is now rising to the fore as Greece faces a new test in its attempt to avoid bankruptcy when international auditors arrive in Athens today. The "troika" audit team from the European Union, European Central Bank and International Monetary Fund is expected to begin talks on the Greek government's plan to deepen budget cuts and raise new taxes.
This is supposed to allow Athens to meet its commitments under a second aid programme EU leaders agreed in principle in July. However, German Chancellor Angela Merkel has suggested that parts of the new €109 billion rescue plan might have to be renegotiated depending on the audit findings, without elaborating further.
The Financial Times newspaper has reported that a split has opened in the Eurozone over the deal. Quoting senior European officials, it said as many as seven of the 17 member states have argued that private bondholders should shoulder more of the burden.
Hardliners in Germany and the Netherlands are leading the calls but are meeting fierce resistance from France and the ECB who are heavily exposed to Mediterranean sovereign debt; France through its banks, the ECB through its efforts to rescue the euro by buying the debt of these nations.
This sort of infighting amongst Europe’s leaders will only serve to undermine the recent rally in shares and the euro, underlining the importance of the audit’s findings.
Data yesterday was almost completely ignored with a measure of the German consumer climate pretty much at expectations, US consumer confidence slightly lower and realised industrial sales in the UK just as bad as feared.
Today brings German preliminary inflation, US durable goods orders and the Bank England credit conditions survey.
While the fickle market lurches from cautious optimism to gloom and despair, expect the currency markets to remain volatile.
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, 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.
'GBP/USD Spreads Rally as Risk Appetite Returns', Article by Moneycorp, last update: 28-Sep-11
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