For the latest FX Daily Trading Update see FX Day Trading.
FX Day Trading - 7 December 2011
France and Germany to underwrite Italy
At least that's what it looks like
Merkel drops insistence on write-downs
Parliament's crossbench Treasury Committee was as ready as ever yesterday to sink its teeth into another hapless civil servant. This time it was Robert Chote, head of the Office for Budget Responsibility, under the cosh.
MPs accused the OBR of getting its economic forecasts "horribly wrong" and one suggested its calculations were nothing more than "guesswork". It is true, of course, that projections made 18 months ago now look ridiculously optimistic.
However, even the finest forecasters could hardly have been expected to assume that EU leaders would make such a pig's ear of sorting out Euroland's sovereign debt crisis. An assumption like that could only have come from a dyed-in-the-wool cynic.
Rather less cynicism was necessary to anticipate that the European Financial Stability Facility (EFSF) would struggle to retain its AAA credit rating, even before Standard & Poor's put the rest of Euroland on notice for a downgrade yesterday (except for Greece, whose rating can sink no further).
And there must be a fair few sceptics scattered around the FX spread betting market, given the euro's resilience to the news. Compared with Tuesday morning the euro opens today half a yen and a full US cent firmer.
Helping it higher was the story from Berlin that Angela Merkel had dropped her demand that private investors should share the pain by taking a haircut – a write-down in the value of their government bond holdings – in case of any future sovereign default.
The idea is to avoid discouraging investors from buying the bonds of, say, Italy. They are stuck with a "voluntary" 50% write-down on their Greek paper but it will never happen again. Honest.
Mrs Merkel's back-down also gives investors something else they were looking for: If private investors (read banks) are to be indemnified against losses on Euroland sovereign bonds, somebody or something will have to underwrite that protection.
Presumably that will be the EFSF in the first instance, but standing behind the EFSF will have to be Germany and France.
So if this turns out to be for real, and if it gets the nod at this week's summit meeting, Euroland government bonds will have the French and German support for which the spread betting market has been hankering.
All that remains is the need to persuade investors that the promise would be kept and that France and Germany would have the wherewithal to keep it.
It was figures for gross domestic product (GDP) that provided the only real statistical stimulus yesterday.
Quarter-on-quarter, Euroland repeated its provisional 0.2% growth, Brazil was flat and Australia reported 1.0% expansion.
Canadian data showed an 11.9% jump in building permits and there was a half-point improvement in the Ivey purchasing managers' index that put it at 57.1.
The Bank of Canada kept its target interest rate at 1%, as expected, but Governor Mark Carney sent the USD/CAD lower when he dropped a heavy hint that rates could be moving higher before too long.
Today's significant data releases extend no further than UK and German industrial production.
Tonight the Reserve Bank of New Zealand is expected to keep its cash rate at 2.5% and Australia reveals employment data for November.
Not much to go on there then, so it will probably be the flow of information and rumour from Berlin, Brussels and Paris that exerts the most influence on exchange rates.
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.
'USD/CAD Spreads Drop as Bank of Canada Hints at Rate Increase', Article by Moneycorp, last update: 7-Dec-11
Related articles:
FX Day Trading, 18-Apr-12,
Daily FX Trading updates covering the influences on the key FX markets. Daily updates include key FX market movements and features the Dollar, Pound, Euro and Yen as well as...see: FX Day Trading
FX Day Trader, 17-Apr-12,
A daily review of the currency markets concentrating on the major Dollar, Yen, Euro and Pound Sterling markets...see: FX Day Trader
£1 per point: Start trading £1 per point/tick & an initial deposit of £30
Multiple markets: Forex , Commodities, Indices & Equities
Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
(1) The FTSE Rolling Daily Spread is 1 tick during market hours & 4 ticks out of hours. 1 Tick is defined as a full FTSE point. See our Product Information for more details. (2) The above information is correct at time of writing. (3) Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it 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.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
