For the latest FX Daily Trading Update see FX Day Trading.
FX Day Trading - 19 September 2011
Any credibility left for traders, banks or politicians?
Intesa Sanpaolo: Italy cannot rule out risk of default
European minnows challenge established economies
The rogue trader is just a sideshow ‡, the real news is that the situation now facing the world economy is so bad that on Friday central bankers felt the need to intervene in the markets by providing joint US dollar liquidity to support the European banking system.
Whether you believe the root cause of the current ills stem from iffy banks or iffy politicians, the end result is that banks are now so worried about the crisis within the eurozone (and who holds what on their books), that they are holding back from lending to each other – it could be 2008 all over again.
The initial reaction to the USD liquidity provisions had been positive, however this is a stop gap – not a solution – and as such the relief rally may be temporary.
The market certainly does not always know best, but Chancellor Merkel's dismissal of demands to introduce Eurobonds and increase the size of the European bailout mechanism – the ESFS – is only exasperating an already-desperate situation. As far as the spread betting market is concerned the game is already up for Greece.
Just as UBS is able to take a $2.3 billion hit, Europe can probably take a Greek default on the chin, but the pressure on Europe’s tectonic plates seems to grow ever graver.
While Greece desperately attempts to find further cuts in order to secure the next loan instalment, the German finance minister said “membership in a monetary union is a opportunity but also a heavy burden. Measures for alignment are very difficult. The Greeks must decide whether they want to bear this burden."
This potentially seismic political shift will fuel eurosceptics' views that the euro is a failed experiment and contagion is only a matter of time.
Friday's data made very few waves; European exports rebounded 2% in July, with notable gains by Austria, France and the Netherlands, but with June's 5% contraction the ECB will be worried that – just like in Q2 – faltering export demand will continue to hamper the region's recovery.
This suggests that the economic area may struggle whilst the respective governments implement their spending cuts, and in turn raises the possibility that the next ECB move may be to lower rates. US foreign net buying of long-term US assets came in $9.5 billion, $20 billion or so less than expected, and the US Michigan sentiment index rose to 57.8, slightly above the forecasted 57.0.
Looking at the FX spread betting markets, the day ahead includes no Tier 1 data. From the UK, the Rightmove House price index showed a 0.7% increase. In a move that is expected to support the argument for another round of quantitative easing, the Bank of England is this morning expected to talk up the success of its original programme, suggesting it may have raised the level of GDP by 1.5% to 2.0%.
We will get further evidence regarding voting patterns when the minutes from the most recent bank rate meeting are released on Wednesday.
From Europe, we have construction figures and from the US, the NAHB Housing Market Index. The recent trend is for big moves based on sentiment, and it seems ‘risk-off’ is ramping up again.
‡ although not for UBS shareholders, or one of the 3,500 UBS staff expected to lose their jobs in order to save the same $2.3 billion loss attributed to Mr Adoboli.
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.
'German Refusal to Increase ESFS Funds Frustrates Spread Betting Market', Article by Moneycorp, last update: 19-Sep-11
Related articles:
FX Day Trading, 18-Apr-12,
Daily FX Trading updates covering the influences on the key FX markets. Daily updates include key FX market movements and features the Dollar, Pound, Euro and Yen as well as...see: FX Day Trading
FX Day Trader, 17-Apr-12,
A daily review of the currency markets concentrating on the major Dollar, Yen, Euro and Pound Sterling markets...see: FX Day Trader
£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.
