Unfortunately the FX markets, which seemed to be selling the Pound and Euro in anticipation of a rate cut from both the ECB and MPC only reversed for the Euro and not for the Pound. Sterling is now weakening again against all the majors and yet another attack on the $1.95 level vs the dollar is going on as I write. Sentiment on currencies can be a fickle master with the ugly duckling turning into the beautiful swan almost in the blink of an eye. Until June last year nobody wanted Yen as the ‘carry trade’ worked its magic but since the 22nd of that month suddenly the Dollar and Pound became the smelly socks in the drawer. When you read of this or that guru talking about ‘long term’ trends just remember how few were forecasting the last nine months of correction.
FX Spread Betting, 8 May 08
For today, dealers will take their lead from the rate decisions due at 12.00 (BOE) and 12.45 (ECB). This should make for a peaceful morning. My indication yesterday that currencies might be moribund until today was a little wide of the mark as the pound and euro decided to react to today’s expected cuts as though they had already happened. Both currencies had a tough time of it and the Euro continues to do so this morning, falling through the $1.5350 support level overnight before bouncing off the $1.5280 support in early European action.
The pound is holding above $1.9500 having hit the level yesterday afternoon and several times in the small hours this morning. The currency is building a volume support at just above $1.95 and bulls will be hoping that the effects of any rate cut will have been factored into the market before it happens. If this occurs then there could very easily be a relief rally on the actual announcement. And, of course, there is always the chance that the BOE will do nothing.
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FX Spread Betting, 7 May 08
On the forex spread betting front the pound is battling to maintain its strength against a host of crosses. Cable is drifting below $1.9600 in early action. Whilst we have had innumerable failed attempts to go lower over the past few months, you do get the feeling that the battering ram will at some point break through. With the Bank of England decision to be made tomorrow it would be surprising if a move were to be successful today. That means we may find short term buyers coming in at these prices merely for today’s session.
FX Spread Betting, 6 May 08
Looking at the FX spread betting market last week the slide in the Euro gathered momentum, partly due to demand for the Dollar. The Euro ended the week at EUR USD $1.5410 and EUR GBP £0.7800. Sterling weakened marginally against the Dollar to $1.9720.
FX Spread Betting, 2 May 08
Enthusiasm around the US economy was behind the drive of the currency markets yesterday with the dollar making substantial gains against sterling and in particular the euro. Today’s non-farm payroll figures may put a halt to that if they come out much worse than expected.
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FX Spread Betting, 1 May 08
In the FX spread trading markets the pound regained it trading range with some ease yesterday afternoon and we are back in the $1.9700 to $2.000 region once again. With the current GBP / USD spread at $1.9906 - $1.9909 I can see Financial Spreads clients, who bought the move below $1.9700 in large numbers yesterday, taking profits very soon. That’s on the reasonable basis of “let somebody else take us above $2 if they can, I don’t want to risk it with my money!”.
The announcement by the Fed of another 25bps off the base rate was not a surprise but it rather reinforces the worldwide impression that the US is following a policy of dollar devaluation (notwithstanding statements made by politicians). With Europe and the UK unlikely to follow with such dramatic rate reductions foreign currency players have only a poor return to contemplate when buying into the Greenback. This would not matter too much if the economy was perceived as being reasonably robust or if the trade balance was close to parity. Unfortunately the opposite is the actuality and so the dollar bears will continue to circle the markets for some considerable time.
This does not mean that the dollar will necessarily decline, as much world business outside of the US takes place in dollars, but it does make a serious rally less likely in the short to medium term. If the US does drift into a recession (we are not in one yet no matter what you read) then the prospects (as with the pound) do not look rosy.
Spread Betting on FX, 30 Apr 08
On the currency, front the pound finally broke out of the $1.97 to $2.00 range and we have slipped to a GBP / USD spread of $1.9646 - $1.9649 in early action today. FinancialSpreads.com clients are buying into this weakness (and have been buying since the $1.9750 level) so they must be hoping for a regaining of the aforesaid range soon. If we can close down here for a few days then the probability starts to switch towards a concerted move lower. The pound has had a truly awful time for quite a period and, unfortunately, this shows no signs of halting just yet.
Spread Betting on FX, 29 Apr 08
The markets today look to be going over the same ground as yesterday with the pound dropping back to yesterday mornings level around £1.9800 and Gold and Oil reversing some of the recent gains.
Spread Betting on FX, 28 Apr 08
Sterling is back in the mid range of the $1.9700 to $2.0000 region (I get tired of writing this) with current GBP USD spread at $1.9797 - $1.9800. We had several attempts on Thursday and Friday to break below the $1.97 mark but all were defeated. The Capital Spreads clients continue to trade the range and have been good buyers on weakness and sellers on strength which has proved very profitable over the past three or four weeks. For longer term traders there is some need for a break out but in all honesty it is difficult to see which way this is likely to be. The trend appears to be for a weaker pound but we really need a confirmation of a move lower for the bigger players to join in.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Forex Trading May 2008' by DB, updated 09-May-08
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