Euro - Dollar Spread Betting Market Falls as Bernanke Fails to Hint at QE3
Spread Betting 8 June 2012
Hopes of further monetary stimulus have been dashed once again. The world's major central banks have made it clear that they are not the answer to all of our economic problems.
The inaction from the ECB, BoE and the Federal Reserve Chairman Ben Bernanke has given spread betting markets a little time to pause for thought.
Yesterday, an early rally in the Dow Jones was undoubtedly driven by China’s first interest rate cut since December 2008. Investors piled into resource stocks in the hope that other central banks would follow China's lead.
However, that optimism did not last long and investors remain nervous about how things will unfold in Europe over the near future.
Whilst Bernanke was speaking, risk appetite gradually wore off and this caused the Dow to retreat from its highs. That profit taking has also fed through to the open of European markets this morning.
The FTSE is trading some 40 points lower at 5410, after failing around the 5480/5510 resistance level. As a result, a break above this resistance will remain the bulls' near term target.
Our financial spread betting account holders have enjoyed the bounce in equities, after positioning themselves for such a move just before the rally materialised.
This pre-emptive stance was going against the weakness of recent weeks and so those with the strongest nerves have been rewarded.
Economic data is thin on the ground today, with the UK's producer inflation numbers this morning.
Along with the CPI, producers have finally been starting to see prices fall and they will hope to see further declines today.
The month-on-month input number is expected to come in at -1.3%, leaving the year-on-year figure at +1.3%.
Later this afternoon, the US wholesale inventories are expected to tick higher.
The surprise move by China, to ease its monetary policy and cut interest rates, triggered a rally in global markets which benefited the euro.
Nonetheless, Ben Bernanke had a rather neutral stance in his speech yesterday, deciding not to embrace QE3 just yet.
Investors seemed to be slightly disappointed by his comments and pushed the euro - dollar market down by 14 points to $1.2562.
This morning, weakness from the latter part of yesterday’s session has followed through to today. The pair is heading back below the $1.2500 level, currently trading at $1.2490.
‘No rush for QE3’ was Bernanke’s message in yesterday’s speech and this left the pre-emptive gold rally looking rather exposed.
As a result, gold futures plunged below the $1,600.00 level, ending $29.47 down at $1,589.00.
Judging by the overnight performance, the precious metal could have further to fall unless some bargain hunters return to the market.
US crude oil joined the global rally after China announced its rate cut, as the move should help to boost oil demand in the world’s second biggest consumer.
However, the rally quickly reversed when Ben Bernanke failed to suggest that another round of stimulus is around the corner. Consequently, US crude oil futures finished $0.68 in the red at $84.82.
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'Euro - Dollar Spread Betting Market Falls as Bernanke Fails to Hint at QE3' edited by SD, updated 08-Jun-12
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