GBP/EUR Spread Betting Market Sees Gains on Weakening Euro
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 21 October 2011
Often you wonder whether politicians read the papers and, if they do, whether they flick through the financial section.
It seems incomprehensible that they can still be at logger heads about how to deal with the European sovereign debt crisis when the situation is escalating and becoming worryingly nerve wracking.
Now Germany is seeking more time and wants to delay Sunday's decision making until next Wednesday. This takes us tantalisingly close to what the spread betting markets see as the deadline which is the next G20 summit at the beginning of November.
Unfortunately, as regularly mentioned in the past, politicians are only really interested in one thing and that's peoples' votes.
This is why they will always find the hardest decisions, which are usually the most unpopular, impossible to make. Such decisions risk an incumbent government's position in power or the loss of an important majority they may hold to pass legislation.
We are seeing Germany's reluctance to commit and take a lead on the Eurozone crisis because Chancellor Merkel's majority is rather slim. In the last crucial German vote on the extension of the EFSF's powers she only just won.
Any agreement in the coming days will require further votes and next time the support may not be there, as we saw in Slovakia.
Interestingly, even though the outcome of this weekend's summit is under threat from further delay, the UK 100 is a little higher on the open this morning.
Strength from US stocks yesterday is the main reason for this, but you would normally expect weakness to be setting in as the EU calendar is shifted again.
This further extends the bout of uncertainty and, between now and then, it seems hard to see that the UK 100 will make any meaningful gains, even if it did breakout to the upside beyond 5400 a few days ago.
We were calling the UK 100 spread betting market to open a few points above 5400 which it did but already we're seeing the index falter a little and test just below here.
On the economic data front we've already seen the Nationwide's UK consumer confidence measure fall for the fourth month in a row. Unsurprising really when you consider what the consumer is up against at the moment.
Rising unemployment and prices mean there's not only less people with a regular income stream to spend money, but you need more money to buy stuff.
Later this morning the German Ifo survey is released which is expected to fall only slightly which is relatively encouraging for Europe's biggest economy.
Also this morning, the UK's public sector net borrowing is released and here once again we are expected to see the monthly figure indicate that hitting the annual £122 billion target is unlikely to happen.
The dollar is seeing a little bit of strength this morning with the dollar index hovering just above the 77 level.
This is at the expense of the euro and sterling which are drifting to the downside but not with any great momentum.
EUR/USD is finding it difficult to hold onto the $1.3800 level as it trades at $1.3735 at the time of writing having been trying to hold its ground overnight.
Cable is not suffering as much as the euro this morning and so sterling has the edge over the single currency this morning as GBP/EUR trades at €1.1480.
Having traded between €1.1400 and €1.1500 over the last few days, the ongoing talks in Europe could give the pound the momentum to push beyond the near term resistance at €1.1500.
Even though the dollar is a little stronger this morning, the gold spread betting market is higher by 60 cents to $1625.
Yesterday gold had another look at $1600 but has found some support from the bulls. Here is a market that has seen such substantial gains in the past few years, but since margins were hiked by the exchanges, the momentum seems to have come to an end.
The sideways move over the past month doesn't look vastly encouraging for the longer term prospects of gold's bull market. However, I seem to remember people have said similar things in the past and then the metal shot off higher again.
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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'GBP/EUR Spread Betting Market Sees Gains on Weakening Euro' edited by SD, updated 21-Oct-11
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