Rajoy the Bull

21 September, 2012

Tom Arnold

There is not much in the way of important data to watch out for today, with the only release of significance being the UK’s public sector borrowing figures out this morning at 9.30am. Expectations are for a significant improvement in the figure, which could see the Pound make some gains, although it is likely to be priced in already – possibly one of the reasons for the Pound’s surprising resurgence in the last couple of days. So it is worth keeping an eye on this, because if the data is not as expected, the pricing-in could unravel fast, with the Pound losing its recent gains.

Most of the market’s focus seems to be on EURUSD, with the big question being; will the Euro manage to break through current resistance levels and continue its strong recent performance against the ailing US Dollar? Analysts seem split, with the situation in Spain critical. The markets believe a Spanish bailout is inevitable, but recent Spanish bond sales have been surprisingly successful, which is giving the Spanish PM a more positive outlook than may be warranted, and as such he is putting off asking for said bailout. With pricing in again forcing recent moves, and investors’ concerns of high stakes gambles in such a dangerous economic situation, watch out for news coming from the European leaders’ meetings this morning. Rumours are that the EU authorities and Spain are discussing the bailout, but PM Rajoy appears to be bullish about Spain’s chances without a handout – if he holds out too long the knock-on effects could push the Euro right back to the brink, whereas if he bites the bullet we could see further Euro strength.

With all this in mind, your upcoming currency purchase is likely on a knife edge. We currently have the best US Dollar buying rates since early this year and Euro rates are only 2 cents off 4.5 year highs. Is it worth holding out for that inch, with the mile looming? Make sure you stay in close touch with your CI account manager, and if you haven’t got one yet, then register for a trading facility now.