Spread Trading 18 Jan 11
Spread Trading 18 Jan 2011
Inflation is the focus for UK investors today with CPI and RPI numbers being released at 9.30 this morning.
Something that is already causing central banks in emerging economies to act and they have been for some time now, it is soon going to be the turn of Europeans to do the same.
At the last meeting of the ECB the language was more hawkish than normal citing its concern in the recent jump in inflation and for the BoE their undertones have been indicating action on interest rates could be quite soon.
This change in interest rate expectations is another reason for the likes of Sterling and the Euro seeing a bit of renewed strength in the last couple of weeks. A few bankers have recently be saying how a bit of inflation isn't all that bad, but the levels at which they are now, and are expected to get to, are cause for concern.
Wages in both the private and public sector are barely going up at all, if not they're going downwards, so as prices rise consumers' spending power is rapidly being eroded. Savers will also be hit particularly hard as prices for petrol, food and clothing continue to move skywards.
The FTSE is seeing good strength this morning recouping its losses from yesterday with the mining sector leading the charge following some good news from Rio Tinto.
Gains are being made across the board, so once again a mild decline for the index has been immediately met by buying as the battle of the 6000 level between bulls and bears continues.
Apple's stock will also be focused on today as they announce their earnings on a day when their CEO Steve Jobs has been hitting the headlines for taking medical leave. Investors will hope that their numbers will reverse weakness in the stock during yesterday's European session.
On the forex spread trading markets, the Euro retraced some of the gains it made last week with a dip back below $1.3300.
Eurozone finance ministers enjoyed a jolly little catch up yesterday sitting round the table drinking tea and eating biscuits. They then most probably went out for a very decent dinner in Brussels before repeating the whole process again today. This seems to have had the desired effect for the Euro which is strengthening this morning to $1.3350.
The recent strength has led to ambivalence for the Euro as investors continue to be undecided as to whether the single currency is under valued at its current level or if it has further south to head. The $1.3400/50 area remains a significant resistance level for EUR/USD and to the downside support is seen at $1.3165.
Sterling also made back some ground against the Euro and isn't far off the €1.2000 level again which remains quite a hurdle for GBP. Without a move back above here soon we might see GBP struggle to reclaim and maintain €1.2000, but with the Euro remaining under pressure, a test of 2010's high around €1.2360 can't be ruled out.
Gold shifted sideways as US markets were closed for Martin Luther King day. This morning activity is already picking up with the precious metal trading at $1366.
Our spread betting clients remain bullish, expecting the recent retracement to have presented a good buying opportunity. Often US traders return from a bank holiday in quite a bullish mood so there could easily be a renewed push higher.
Crude volumes were also thin and Nymex hovered around $91 and Brent had no bulls around to push it above and beyond the triple figures. Brent's at $97.85 and once again we see how major figures can prove a psychological barrier to traders.
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'Spread Trading 18 Jan 11' edited by SD, updated 18-Jan-11
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