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FX Day Trading - 25 October 2011
Narrow ranges and low volumes ahead of EU plan
The calm before the storm?
Or a calm sea and a prosperous voyage?
Using an infrared scanner and a helicopter, London police have discovered that 90% of the tents blockading St Paul's cathedral are unoccupied overnight.
Two things become clear: the anti-capitalist protestors are actually commuters, and the police have more money than they know what to do with.
The same is true of most spread betting investors, especially the second bit. There is a lot of fence-sitting and thumb-twiddling going on at the moment. Turnover in financial markets yesterday was a fraction of normal volumes and price ranges were tight.
In 36 hours or so the EU will reveal, in all its full glory, the plan to resolve southern Europe's debt crisis. Until then, those with cash to invest are inclined to bide their time.
If EU leaders get it right, that cash will go into equities, commodities and their related currencies, and into champagne. If they get it wrong the money will go into mattresses, safe-havens and hair shirts. In the meantime it looks as though everybody is trying to keep their heads down.
For the FX spread betting market in particular, the effects of this sitting-on-of-hands yesterday were ranges of half a cent for sterling/euro, one cent for Cable and three quarters of a cent for euro/dollar spreads. Net changes for those three over the 24-hour period were 10 ticks†, 2 ticks and 15 ticks respectively, i.e. nothing.
There were a couple of ecostats kicking around on Monday but they were not enough to get the blood flowing in traders' paralysed fingers. Provisional Eurozone purchasing managers' indices all came in below par, below forecast and below the previous month.
The only glimmers of light came from the German services sector, where the PMI popped up into the growth zone at 52.1, and Euroland industrial new orders, which went up by an unexpected but useful 1.9% in August.
The New Zealand dollar eased by more than half a cent after inflation figures showed prices rising by 4.6% in the year to September. The number was well down from the 5.3% reported three months earlier and effectively kills any remaining chance of an increase in the 2.5% official cash rate when the central bank discusses the matter on Thursday morning.
Struggling to keep interest alive in Europe today will be French, Italian and German consumer confidence, Italian retail sales and BBA mortgage lending.
Canada's contributions are retail sales and the Bank of Canada's interest rate decision (surely to stick at 1% for a 13th month). The United States offers house prices, consumer confidence and the Richmond Fed's manufacturing index. New Zealand business confidence and Australian inflation come out tonight.
Assuming no horrors among those numbers and no unguided missiles from Euroland, it is probably fair to assume that today will be another quiet one.
What might upset that applecart is a spat about the losses investors could be forced to volunteer to take on their Greek bonds. In late July the percentage writedown was pencilled in at 21%, a figure grudgingly accepted by investors. Now, however, there is talk of losses in excess of 60%.
They really ought to get their act together before the grand unveiling tomorrow evening or it could all go for a ball of chalk.
† A 'tick' is the minimum amount by which a price can move. In foreign exchange the definition is necessarily vague because wholesale markets use fractions of a tick, for example when pricing forwards. However, normal usage has it that one increment of the fifth significant figure represents a tick, for example when Cable moves from $1.5985 to $1.5986.
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.
'Shares Spread Betting Markets Rangebound Ahead of EU Summit', Article by Moneycorp, last update: 25-Oct-11
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