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FX Day Trading - 31 August 2011
Confidence, confidence, confidence
Pessimism higher everywhere
FOMC minutes reveal dissent
The Committee on Agriculture and Rural Development (AGRI) is the military wing of the European Commission, responsible for preventing the accumulation of a European Money Mountain.
AGRI's latest money-reduction scheme involves spending €2 million on research into phytotherapy (herbal homeopathy) for cows. They want to find out what happens to them if they eat grass.
A somewhat more useful experiment went on yesterday in Rome, where the Italian government wanted to find out what would happen if it fed bonds to investors.
The results were inconclusive. The market swallowed everything it was offered, achieving a yield of 5.22% on the ten-year paper. For the borrower that was better than the 5.77% it had to pay at the previous auction in July.
However, demand barely outstripped supply and everybody knew the European Central Bank was standing in the background, ready to play pass-the-parcel with any paper that investors wanted to offload. Without the presence of the ECB it would have been a different story.
The minutes of the August Federal Open Market Committee showed that three members objected to the commitment to keep US interest rates at "exceptionally low levels... at least through mid-2013".
Like the economists on the Bank of England's Monetary Policy Committee, the bankers on the FOMC are far from united and are not, it seems, afraid of dissent. A third round of quantitative easing next month is far from a done deal.
Figures from Euroland and the United States demonstrated that it is not just in Britain that confidence is at a low ebb. Eurozone consumer confidence fell by five points to -16.5 in August, economic confidence dropped five points to 98.3 and industrial confidence was down by three at -2.9.
The Conference Board's index of US consumer confidence slumped from 59.2 to 44.5, a 25% drop. By comparison, the overnight fall in Gfk's index of UK consumer confidence from -30 to -31 looked almost benign.
In Britain mortgage approvals numbered 49,230 in July, 230 more than spread betting investors were expecting and the highest level since May last year. The news did no good for sterling though, perhaps because mortgage lending is still barely half what it was before the financial crisis.
The GBP/EUR spread betting market managed to hold its position, having returned from half-cent expeditions in both directions during the London session. Both currencies were down by half a cent or more against all the Anglophone dollars.
Among a raft of Japanese data this morning, the most disappointing was a smaller-than-expected 0.6% monthly rebound for industrial production. The number should have been two or three times as big.
German retail sales, however, exceeded expectations when they did not rise in July; a 1.5% fall had been pencilled in by market analysts.
Coming up are Euroland inflation and unemployment, Canadian second quarter GDP and US factory orders. With no UK data to come, the pound might have chance for a rebound after four days of relative unpleasantness.
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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.
'Rise in UK Mortgage Approvals Fails to Boost Sterling Spread Betting Market', Article by Moneycorp, last update: 31-Aug-11
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