US Dollar Falls on Currency Spread Betting Markets as Growth is Revised
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 3 November 2011
The drama continues as now the Greek Prime minister is being pressured to turn his referendum into a yes or no vote on membership of the euro as opposed to just the latest bailout.
These political games are costing the Eurozone dear as once again we see the bond yields rise on Italian 10 year debt.
Financial spread betting investors are really starting to lose faith in the whole EU project and the cracks are beginning to show as Italy’s latest bond auction was not a successful one.
In addition, demand for EFSF bonds has fallen flat on its face, the lukewarm response to the EU summit plans from China and Japan are a worry and the bond yields for the danger zone states carry on higher.
Greece had its latest tranche of bailout funds taken away from it ahead of the referendum, which is expected early next month. This is cutting it fine for the country which will default then if it doesn’t get it.
The timing is becoming a real issue now as the market is becoming more and more reluctant to lend to the likes of Italy and Spain which are swiftly becoming the major issues for the Eurozone.
So it’ll be touch and go as to whether Greece defaults or not and if the worst case scenario does happen then that’s when things will really start to get ugly.
A non-voluntary default will trigger CDSs for which the black hole is impossible to know how deep it goes, particularly if this were to trigger the contagion that everyone fears so much. This could trigger a Lehman situation on a sovereign scale.
Unsurprisingly the FTSE 100 spread betting market is a little lower this morning, wiping out its gains from yesterday as investors closely watch the G20 meeting get underway.
There are other events of the day that will be closely watched. Initially we’ll see the UK services PMI number, which is expected to remain above 50.0 in expansion mode.
However, considering the manufacturing number dipped below 50.0 earlier in the week there maybe pressure to the downside. Services make up a huge part of our economy and are critical to GDP so these will be closely watched.
Then the ECB makes there interest rate decision, the first for new President Mario Draghi, and expectations are for him not to reverse Trichet’s hikes just yet. Having said that, he may bring in the first cut next month but don’t be surprised if we see a cut today considering all the turmoil in Europe.
The dollar fell on the currency spread betting markets yesterday as economic growth was revised and there was expectation that another lot of quantitative easing could be introduced.
The euro took advantage against its counterpart and had around a 50 pip jump, although that was slightly short-lived.
This morning the pair is trading down as traders are feeling the heat after EU leaders stated that they will suspend the next tranche of aid to Greece until the referendum is decided.
The EUR/USD is trading at $1.3701 and until there is a positive statement from somebody significant, we could see further downside over the short term.
As the dollar slumped in yesterday’s trading, due to hint-dropping by Fed Chairman Ben Bernanke about more stimulus if the economy remains weak, gold made back recently lost ground. Support was also given by the carnage in Europe.
All in all the precious metal made a conservative gain of $16 to end at $1736.5, which at time of writing is in the process of being eradicated, as the yellow brick sits at $1729.9.
Amid yesterday’s concerns on the EU bailout plan, the rise in the ADP employment report was a breath of fresh air.
The US private sector added 110,000 jobs last month, beating expectations and spurring on energy traders thoughts of strong demand for crude oil remaining.
So in the early afternoon trading, the liquid stuff had a nice little rally, which was wiped off later on as the US Department of Energy report on crude stockpiles showed inventories were higher than initial expectations. At time of writing, Brent is trading at $108.3, down $1.07.
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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'US Dollar Falls on Currency Spread Betting Markets as Growth is Revised' edited by SD, updated 03-Nov-11
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