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FX Day Trading - 26 August 2011
QE or not QE; that is the question.
Markets await speech from Fed chairman
Revisions to UK and US Q2 GDP today
Public spending remains under pressure around the world. The latest money-saving measure comes from Japan. Future prime ministers' business cards will only be printed by the dozen.
And they will be slightly cheaper, too. Figures released early this morning revealed that deflation continues to nip at the heels of the Japanese economy.
Whilst the national consumer price index rose by 0.2% in the year to July, it was down by -0.5% when stripped of the effects of food and energy. In the capital, prices fell by -0.2% in the year to August. After a decade of exposure to such numbers FX spread betting investors no longer notice them, so there was no reaction by the yen.
There was precious little reaction to any of yesterday's other figures either. ZEW's survey of Swiss companies found them even more pessimistic about the business outlook. Its expectations indicator fell from -58.9 to -71.4. Investors seemed unsurprised that firms in a country with such an overvalued currency should be feeling a little more glum.
The CBI's distributive trends survey, which asks members whether retail sales are going up or down, produced a negative balance of -14%. It was worse than the -10% predicted by analysts but not bad enough to alter investors' already downbeat perception of UK consumer demand. US weekly jobless claims brought no surprises and no movement.
Thursday's most intriguing price action came from the Canadian dollar. Apparently in response to a one-dollar uptick in the oil price, it spiked a cent higher.
When the oil price turned tail and dropped three dollars, the Canadian dollar fell all the way back against the US dollar but elsewhere managed to hold on to at least some of its gains with varying degrees of success. See also USD/CAD spread betting.
Its best achievement was probably against the British pound, which built on the previous day's failure, putting in a dismal performance and allowing itself to be walked all over by every currency on the block.
Sterling's supporters will be praying that this morning's revision to second quarter economic growth in Britain does not result in a downgrade to the initial estimate of 0.2%. They are probably also secretly hoping that there might be an upward revision. And that they might win tomorrow night's national lottery.
After lunch the equivalent US revision to second quarter GDP growth is expected to leave the first estimate unchanged at 0.3% (although because they quote it in annualised terms the number would be 1.1%).
With that and the Michigan consumer confidence index out of the way, it will be time to arrange the sandbags in preparation for the day's main event: the speech by Federal Reserve Chairman Bernanke in which he will announce a third round of quantitative easing.
That is what equity spread betting investors are hoping for anyway. Holders of the dollar, on the other hand, will not be anxious for more Fed stimulus. After Mr Bernanke's announcement of QE2 a year ago, the dollar steadied for a week or so before moving lower and staying lower.
Whichever way the Fed chairman decides to jump, his words are likely to move financial markets. Try to get any currency business out of the way before he stands up at three o'clock. Have a good weekend.
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'USD/CAD Spread Betting Market Climbs on Softer Oil Prices', Article by Moneycorp, last update: 26-Aug-11
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