Mike Paterson’s Daily Forex Brief

We’ve seen some volatile trading in the past 24 hours with the Euro first rallying on better than expected US data but later falling again as Spanish protesters clashed with police in Madrid, resulting in an estimated 64 people injured.

This risk-on risk-off scenario shows how nervous these markets are and rightly so. These are unprecedented times and discretion must very much be the better part of valour, both in business and FX trading.

EURUSD saw a decent rally after better than expected US Consumer Confidence and Richmond Fed Index data, but once again ran into sellers above 1.2950, and duly came back down again accelerated by the disturbing reports from Madrid late in the day. Overnight we’ve been down to 1.2856 and just had another dip to 1.2847 before climbing back to 1.2868 while I’ve been typing this.

EURGBP has not been so lively however, trading relatively quietly in a 0.7955-0.7972 range (GBPEUR 1.2542-1.2572) perhaps book-ended by the demand on both sides that I highlighted yesterday.

GBPUSD has fallen down to 1.6149 as the risk-off sentiment returns but overall the Pound is little changed.

The Aussie dollar has had another wobbly moment as now happens in a risk-off scenario but is running into a few buyers on key technical support levels.

It’s not just the Spanish unrest that’s giving traders the jitters but also the awful data currently coming out of the country and the big question remains when, not if, they will ask for help. Throw in today’s national strike in Greece as well as doubts creeping in as to whether the recent QE3 introduced by the Fed will be as effective as originally hoped plus a heap of other negative vibes and it’s not difficult to see a few clouds on the horizon.

As regular readers to this column will know, my only surprise is why anyone had a reasons to be cheerful in the first place. The Draghi Plan and US QE3 are hardly being introduced from a position of strength…..

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

Gold remains the investment of choice but is failing to make new headway despite a plethora of forecasts targeting $2,000, $2,500 and even $3,000 by 2014. History tells us, however, that when everyone jumps on board a move higher there’s invariably a correction lower such as we saw earlier this year.

In cricket’s T20 World Cup there is also reason to be cautious about England’s advance through the Super 8 stage, having been totally found lacking against India and spin, while back in London John Terry’s very public spat with the FA continues as the enquiry by the FA over his alleged racist remarks goes into a third day. We can only hope that a satisfactory outcome is reached for the good of the beautiful game.

Interbank Rates at 08:46 BST

Currency Pair

Current

Overnight

High

Low

EUR/USD 1.2865 1.2913 1.2856
GBP/USD 1.6164 1.6210 1.6149
EUR/GBP 0.7962 0.7972 0.7955
GBP/EUR 1.2561 1.2572 1.2542
GBP/CHF 1.5186 1.5200 1.5170
GBP/AUD 1.5616 1.5648 1.5570
EUR/CHF 1.2089 1.2101 1.2086
GBP/HKD 12.5319 12.5676 12.5203
EUR/HKD 9.9768 10.0204 9.9604
GBP/ZAR 13.3120 13.3617 13.2310
USD/JPY 77.63 77.83 77.59
GBP/CZK 31.3721 31.4573 31.2025

Today’s Data: BST

11.00-UK – CBI Distributive Trades Survey

13.00-EU – German CPI

15.00-US – New Home Sales

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.

To contact Mike please call +0044 (0) 1732 700383 or email mike.paterson@economicvoice.com

The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.

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