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FX Day Trading - 20 October 2011
I can't believe it's not a debt crisis solution
Germany and France disagree over fundamentals
UK QE move driven by Euroland concerns
Grateful EU leaders hosted a farewell concert for retiring European Central Bank President Jean-Claude Trichet at the Alte Oper concert hall in Frankfurt last night.
They avoided what might otherwise have been obvious choices such as Les Miserables (too jolly) and Wagner's Ring Cycle (too short to represent the eonic timescale of the Greek debt crisis). Instead, in an inspired move they staged Mahler's Kindertotenlieder, featuring Morrissey, James Blunt and Leonard Cohen.
No sooner was the performance over than Angela Merkel rushed over to embrace Nicolas Sarkozy to congratulate the French president on the birth of a legitimate daughter. The pair then went into a back room to trade blows over the solution to the European debt crisis which they promised, a week ago, would be announced in two days' time.
Their disagreement is apparently a fundamental one, about the structure and role of the ECB and the European Financial Stability Facility. There is also disagreement about the pace of bank recapitalisation and the percentage loss bondholders should suffer when Greece defaults.
Spread betting investors did not wait until the evening to decide that Tuesday's glib optimism had possibly been misguided. Not only was the €2 trillion bailout fund story a crock; it looked as though an agreement was no closer than it had been when the first agreement was agreed two years ago.
Whilst nobody doubts there will be a triumphant announcement after the EU summit this weekend, everyone expects it to be no more than a cobbled-together rehash of all their previous triumphant statements.
The return to reality was not helpful to the euro or to the commodity currencies. Indices spread betting markets went down too. The pattern has become depressingly familiar. Investors seem unable to follow a middle course; it's either off to the races or out with a razorblade.
Wednesday's economic data created no ripples. US inflation was on target at 3.9% and a 5% fall in building permits was offset by a 15% acceleration in housing starts.
Outside Euroland the only real story was the 9-0 vote by Britain's Monetary Policy Committee members for the second £75bn round of asset purchases, announced a fortnight ago.
Interestingly, the minutes made a dozen references to the euro and Europe. Mention of the domestic economy cropped up only half as often. It left a strong impression that the second round of QE was a defensive move against an imported slowdown.
Out of habit, investors sold the pound after the minutes came out but within an hour sterling had recovered and it proceeded higher against the euro and the commodity currencies. Against the US dollar and the Japanese yen it later fell back because, as usual, a vote against the euro constitutes a vote in favour of the two safe-haven currencies.
Today's only first-division ecostat is UK retail sales. The Swiss balance of trade, Canadian wholesale sales, US existing home sales and the weekly jobless numbers play supporting roles. Nationwide's index of UK consumer confidence comes out tonight.
So commodities spread betting investors will have plenty of time to consider the upcoming announcement about a solution to the European debt crisis. It will be déjà-vu all over again.
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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.
'Spread Betting Markets Lower as Disagreements Over EFSF Persist', Article by Moneycorp, last update: 20-Oct-11
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