EUR/USD Sinks as European Politicians Fail to Agree EFSF Leverage
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 30 November 2011
It’s public sector strike day. Thousands of people will take to the streets of London to complain about the fantastic deal they’ve been offered on pension reform by the coalition.
The union leaders have been gearing up for a fight for months now and despite claims from the coalition that discussions are on going the unions have insisted on spending the day disrupting millions of people’s daily routine.
Of course people are going to get upset about having to pay more and work longer, only to get less when they retire. However, the strikers have to look back and realise that the country simply can’t afford the gold plated public sector pensions promised during the old days of unsustainable borrowing.
Average public sector pay continues to remain way above that of the private sector and their existing pension deals are way out of line with what’s sustainable.
With private sector workers seeing exactly what the coalition is asking the public sector to do, when you see signs like “fair pensions for all” being branded around the picket lines it seems peculiar at best. You have to wonder how they can’t see why the coalition has to make these reforms.
A full blown strike is also disingenuous at a time when the economy is on its knees. All they had to do to keep their mandate going was to strike for as long as a mere five minutes, as opposed to a full day of stomping up and down the pavements.
Unfortunately, the “independent” downgrade to UK growth forecasts yesterday indicated that GDP will be even less next year than it may have been in 2011. As a result, we are likely to see more of these strikes, protestations to government cuts and possibly even riots.
It wasn’t a pretty picture painted by the Chancellor yesterday and if the Eurozone crisis does get worse then even those gloomy forecasts may need to be downgraded further.
Downgrades to some of the world’s major banks by the S&P last night knocked Asian markets for six and that’s feeding through to European stock market indices this morning.
We’ve been calling the FTSE to open lower by some 35 points throughout most of the night and at the time of writing as the market opens up we are at 5285.
For the FTSE, support and resistance is seen at 5240/5195 and 5340/60, 5420 respectively over the near term with the recent rally now being called into question.
Over the slightly longer term things are still looking rather on the negative side with major support since at 5040/4960/4800 and resistance at 5600/5735.
European finance ministers have also fallen short of being able to come up with a plan to boost the EFSF bailout fund to as much as €1 trillion.
As a result, they are having to go cap in hand to the IMF, as well as explore other charitable donors who’ll almost certainly be China and other emerging economies.
This is seeing the euro start in a negative mood this morning with EUR/USD dipping to $1.3275. The rally in recent days has definitely been proved to be short lived following a brief return back above the $1.3400 level yesterday.
For the single currency support and resistance is seen at $1.3240/10 and $1.3395/1.3440 respectively.
Gold has also taken a turn for the worse, rejecting the $1720 level and it would seem that the precious metal is following in the footsteps of the euro and equity markets at the moment.
This morning’s weakness is unexpected considering that you would usually expect to see the price of gold rally on news of credit rating downgrades.
This is clearly not the case anymore, so once again the longer term rally of the yellow brick is being called into question. This morning gold is trading at $1710.
The same can be said for black gold with the Brent crude oil spread betting market falling back from $111.00 to $110.00 this morning.
Near term support and resistance for Brent is seen at $109.50, $107.65, $106.85 and $111.95, $112.55, $113.20 respectively.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'EUR/USD Sinks as European Politicians Fail to Agree EFSF Leverage' edited by SD, updated 30-Nov-11
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