FX Spread Betting Markets Continue to See Relatively Low Volatility
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Trading 30 August 2011
A degree of normality seems to be creeping back into the market as Greece’s stock market posted its biggest one day gain yesterday since the 1980s.
Even though the market likes what they see in the merger of two of Greece’s troubled banks, no one seems to have learnt anything from the UK when Lloyds was forced to take over HBOS.
It is likely that this deal is going to do exactly the same, whereby a bigger bank will be created with the same problems.
We will have to wait and see but for now London is catching up with other European bourses as it was closed for its August Bank Holiday yesterday. As a result, a triple digit gain is greeting investors as they return from the extended weekend.
This August has been a month many will wish to forget which started turbulently as the US couldn’t agree on their debt ceiling and subsequently received a credit downgrade.
Since then the markets have continued in that vein of form with wild swings between highs and lows. There were riots across the UK, a continuing inability for European leaders to come to agreement on how to deal with the Eurozone crisis and seemingly constant downgrades to global GDP forecasts. As a result we’re about to record the most volatile month of August for the FTSE on record.
In fact, things are unlikely to get any better from a volatility standpoint. The financial spread betting markets just seem to be settling themselves but events to come could lead to further big moves in either direction.
Germany’s Angela Merkel faces crucial votes of confidence, Italy has to get some 10 year bonds away and that’s just in Europe. In the US, Non Farm Payrolls are on Friday and the market is still waiting in hope for Ben Bernanke to open the door to further stimulus, which may come at some point in September.
Economic data is thin on the ground this morning but later we have consumer confidence from the US.
This is a very important release due to the US economy’s huge reliance on its consumers which is expected to decline along with almost everything else at the moment.
The University of Michigan numbers have been plummeting, so today’s number is due to fall from 59.5 to 52.2 and, when you’ve had stock market indices dropping so fiercely, there’s little to feel confident about.
We also get FOMC minutes released after the FTSE’s close and when they last met we were told that they will keep their interest rates low into the middle of 2013. However, the devil will be in the detail as investors will wish to see what the major concerns are surrounding the recent downturn in economic indicators.
The strength in equities is not being complimented by the usual Dollar weakness you’d expect in the currency markets.
The US currency is just holding its own against the other majors so EUR/USD is at $1.4490 and GBP/USD is at $1.6380 at the time of writing.
Volatility in the FX spread betting markets over the past couple of weeks has actually been relatively low, when compared to equity markets, with EUR/USD oscillating around the $1.4400 level. For the near term at least support and resistance is seen at $1.4430/1.4395 and $1.4525/50 respectively.
Gold has certainly seen as much volatility as the equity markets in recent weeks with increased margin requirements from the underlying exchange contributing to the major swings.
Gold is creeping back towards $1800 this morning in a quiet session so far, but the moves over the last few days show just how dangerous dabbling in commodity markets can be. Even a small position can see large swings in and out of profit when the market is really moving.
Crude oil spread betting prices are also a little higher in line with gold, with Brent at $112.20.
The fact that it bounced so aggressively off $100 a couple of weeks ago indicates that there are still plenty of buyers of the black stuff out there. However, the recent lower highs and lower lows since April is a cause of concern for the bulls.
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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'FX Spread Betting Markets Continue to See Relatively Low Volatility' edited by SD, updated 30-Aug-11
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