Poor US Data Hurts Crude Oil Spread Betting Market Despite Weaker Dollar
Spread Betting 21 May 2012
Another G8 summit passes and provides the same old hot air where leaders agree that something urgently has to be done about the Eurozone crisis.
However, the only thing that is ever actually agreed is to schedule some more meetings in the coming weeks, where further discussions can be had about the never ending story.
The main thing to come out of this weekend was the increased pressure on Germany to accept the idea of a Eurobond.
The creation of such an asset would not be the only solution needed to resolve Europe’s woes, but it would certainly go someway to calm the waters.
One problem with Eurobonds is that they would have to come with some major strings attached in order to avoid the peripheral states going on a Eurobond issuing spree.
Such a spree would be precisely the opposite of what Germany has been trying to do by instilling some sort of fiscal discipline into the region.
The other stumbling block is that Chancellor Merkel is simply not going to allow it.
If she were to make Germany the back stop behind a Eurobond, ultimately having to pay for the PIIGS profligacy, she would almost certainly lose the next German general election in 2013. If there’s one thing that political leaders really hate, it's losing votes.
The markets have opened with a little spring in their step this morning, the FTSE 100 is up by some 15 points at the time of writing.
This comes as recent Greek polls have suggested that a pro-bailout coalition might be formed in just under a month’s time.
However we’ve seen this all before, with the bulls looking like they are just about to take control of matters and push the market higher, only for any rally to quickly fizzle out.
Support is seen at 5235 and 5185, while the downtrend is capped by the upper-downward trend line at around 5300. Resistance is also seen at 5360, 5435 and 5490.
There’s nothing in the way of meaningful financial market data today, but things will get a little more interesting as the week goes on.
Inflation numbers are out tomorrow, then retail sales and the BoE minutes on Wednesday, and the second reading of Q1 GDP on Thursday.
All-in-all, it should be a fairly quiet week, with nothing being released on Friday, so we’ll continue to focus on the next summit and developments in Greece.
Amid ongoing turmoil in the Greek political arena, some reports have mentioned fresh support for a conservative party that entertains the idea of remaining in the euro.
In addition, European leaders seem determined to hold the Union together, including Greece.
As a result, the euro was able to take a breather on Friday, recovering 97 points to $1.2778, but it will take a lot more to overturn the sudden downtrend.
So far this morning, the single currency has already seen a bit of strength in the currency markets, with EUR/USD trading at $1.2780.
Gold continued its rebound on Friday, gaining $18.73 to $1,592.90 as bargain hunters came into the market.
The weaker US currency was the main reason behind the rally, as it made the dollar denominated gold market look cheaper.
It’s also possible that some investors took a second look at the Fed’s recent choices and decided that QE3 is still a possibility.
In the crude oil markets, it didn't seem to matter that the dollar was under pressure on Friday, even though this would usually support the price of black gold.
Instead, weak US economic fundamentals continued to dominate the energy sector, which was already spooked by fears over reduced European oil demand.
In the end, WTI crude prices fell by $1.38 to $91.48, but not before touching $90.93, the lowest point since 3 November last year.
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'Poor US Data Hurts Crude Oil Spread Betting Market Despite Weaker Dollar' edited by SD, updated 21-May-12
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