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FX Day Trading - 9 November 2011
Time-out for the euro
Power vacuums in Athens and Rome
Investors wait and see
What have the following in common: Lloyds Bank, Greece and Italy? All three are losing money and all three lack a leader.
After a vote of confidence last Friday George Papandreou stood down as prime minister of Greece and has yet to be replaced. Italian PM Silvio Berlusconi, who lost a vote of confidence yesterday, says he will resign but not just yet. Lloyds CEO Antonio Horta-Osório is off sick with stress.
Surprisingly, financial spread betting markets are not in the least dismayed by the lack of leadership. Lloyds shares are 3% higher on the week and the euro is slightly up against the pound and the US dollar.
The euro moved higher on Tuesday in anticipation that 'Bunga-Bunga' Berlusconi was on the way out. A false alarm on Monday had already demonstrated that investors would react positively to his departure.
They will have to wait though; the prime minister will not step down until parliament has approved another austerity package, in a vote scheduled for next week. Even so, the prospect of fresh guidance in Athens and Rome has been enough to persuade investors that all is not yet lost in the quest for a peaceful solution to the southern Euroland debt crisis.
If the euro did well on Tuesday the Swiss franc did even better. Apparently contradicting comments by his boss at the end of last week, Swiss National Bank Vice President Thomas Jordan hinted yesterday that the central bank would not push for a weaker franc.
Two months ago the SNB announced that it would intervene as necessary to maintain a EUR/CHF exchange rate above 1.20. The market has policed itself so effectively since then that no intervention has been necessary, with a daily average price of 1.2250.
Mr Jordan said yesterday that "the minimum exchange rate can't be confused with an exchange rate target." Investors inferred a step back from lifting the minimum exchange rate still further and they bought the franc.
Some analysts disagree with that interpretation and expect the SNB to raise the floor. Trade unions and business lobbies in Switzerland are all pushing for a weaker franc, some calling for SFr 1.40 to the euro.
Yesterday's ecostats were generally more positive for the global economy than the market had been expecting.
Germany's trade surplus widened in September to a seasonally-adjusted €15.3bn and UK manufacturing production grew by 2% in the year to September while industrial production shrank by -0.7%, less than the expected -0.8%.
Housing starts in Canada were ahead of forecast in October at an annual pace of 207.6k. The National Institute for Economic and Social Research estimated that Britain's economy grew by 0.5% in the three months to October.
This morning Australia announced a 2.2% increase in mortgage lending and Chinese inflation slowed from 6.1% to 5.5%. Not much remains on today's agenda, just the UK trade deficit, Canada's new housing price index and US wholesale inventories. The Australian employment numbers come out tonight.
Investors' truce with the euro will probably continue today, sapping demand for the safe-haven yen and the US dollar as well as sterling. The time-out may last until new prime ministers in Greece and Italy (if indeed Sig. Berlusconi does resign as promised) set out their stalls.
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'Lloyds Share Spread Betting Market Higher Despite CEO Stepping Down', Article by Moneycorp, last update: 9-Nov-11
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