Spread Trading 1 Aug 11
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Spread Betting 1 August 2011
It would seem the US politicians have finally banged their heads together in order to come to some sort of deal. This has given investors a bit of relief to kick off the new week and month.
To think that it has taken this long to come to a compromise after months of talks, but then that’s what you get with a coalition administration, which is affectively what the US has.
But the spending cuts announced barely scratch the surface and once again we see a half-hearted approach that will do little to address the ever increasing debt burden.
Real austerity comes in the form of what the Eurozone periphery is having to impose on their countries which includes spending cuts and tax hikes.
Of course no one like raising taxes and such action goes straight to the heart of the consumer which is the driving force of the US economy. However, to get the house in order drastic measures are needed.
If the plans are passed by the Senate and Congress then that’s all good and well, but stiffer medicine will have to be administered later down the road.
The spread betting markets are in relief rally mode with risk assets doing well and pushing higher.
This week is stuffed full of important macro economic numbers and corporate earnings with the UK banks being the focus, a few miners and a retailer in the form of Next.
PMI surveys are the theme of the week along with interest rate decisions and the big US NFP on Friday. So we’re not going to be short of things to talk about.
HSBC has got the UK banks off to a good start by beating revenue and profit forecasts, as well as trying to step up its cost cutting plans by shedding more jobs.
Throughout the week we will see how the other UK banks are faring, in particular Lloyds and RBS which we all own a piece of.
The outlook for Ireland and the UK still doesn’t look particularly bright, which is where these two banks are at risk of seeing a large amount of impairments. At some point it will be nice to have our cash back, but considering the weakness in their share prices over the past few weeks it could be a while.
It’s not long now until the deadline for the US to reach a final agreement has to be met. They say a deal is on the table, but it still needs the US senate to pass judgement for it to shape up completely.
The Euro – Dollar forex rate had rallied sharply on Friday, but traders have read the news this morning and it looks they’re favouring the Dollar on the back of it.
The Euro has dropped a fair amount since the open and is trading at $1.4388, with support at $1.4325 and resistance sitting at $1.4420.
Sterling is enjoying a two-month high against the Dollar as traders are awaiting the finalisation of the US debt deal to pass. The Pound is trading at $1.6437 at the moment, with support showing at $1.6375 and resistance at $1.6475.
According to Sterling – Dollar technical analysis, the pair is facing a pull back on its new support ahead of a rebound, so traders should be cautious here.
As the August 2nd deadline neared, with Congress and the White House getting nowhere nearer to a solution on how to raise the debt ceiling, investors found safety in gold. This helped the yellow metal touch a new all-time intraday record of $1632 on Friday.
This coupled with the lacklustre GDP numbers for March to June, indicating a lower than expected growth, helped investors decide to put their funds into gold.
So the precious metal climbed 12 Dollars to finish the session at $1626, but not for long, as this morning that gain has been eradicated thanks to the talk of an 11th hour deal.
Thanks to the lower than anticipated readings in US GDP, coming in at 1.3% versus the forecast 1.8%, energy demand was expected to take a hit, and traders sentiment pushed the crude oil spread betting market lower on Friday.
The downward revision for the first quarter to 0.4%, down from the initial 1.9%, only added fuel to the fire as investors pondered over the sluggish growth. This morning though the commodities price has been inflated, up to $119.06.
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'Spread Trading 1 Aug 11' edited by SD, updated 01-Aug-11
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