Bickering Over Greek Bailout Saps CFD Broker Confidence in Euro

The US dollar rallied recently as robust American consumer spending numbers reduced worries of another American economic downturn.

American consumer spending, which accounts for around 70 per cent of economic activity, recovered strongly in July. Weak pending sales for existing homes, however, highlighted that the housing sector remains fragile. In addition, the pace of growth in the American manufacturing sector for August was better than analysts had estimated, even so still at its lowest mark in two years.

Nevertheless, the US dollar is likely to market trend down after another abysmal American jobs reading, which CFD brokers see as likely to raise the likelihood of additional action by the Fed to help the economy.

With the benchmark American rate already close to zero, the US Federal Reserve is limited in what it can do. Two waves of quantitative easing costing $2.3 tn, where the US central bank bought into government securities for its own balance sheet increasing liquidity in the US economy, have failed to stimulate economic growth.

The Swissy recorded sharp gains against the single currency & the US dollar following a top government official said that Switzerland would have to cope with a robust currency & the SNB shied away from intervening in the currency markets. Also see our forex trading guide.

The Swiss National Bank has been conspicuously absent from currency forwards markets in recent trading action. It did not take any additional measures after making a statement on three of the last four Wednesdays in August.

The single currency dropped across the board in market activity recently as a deluge of influences, from bickering in the Eurozone about the Greek bailout deal to crumbling American consumer-based confidence, sapped risk tolerance.

Peripheral Eurozone debt concerns haunted the area as Finland suggested that Greece provide some collateral in exchange for more funds. Helsinki’s plan triggered requests from Slovenia, Slovakia, Austria & the Netherlands for similar treatment.

The single currency briefly pared its losses against the US dollar after the release of the minutes from the Fed’s August meeting revealed some members had wanted substantial action to stimulate the economy.

Nevertheless, the release of data indicating that optimism among US consumers plummeted in August to its lowest level in two years maintained spread traders risk averse & the single currency dropped against major currencies, pushed by figures showing contraction in manufacturing for most Eurozone nations.

Figures showing a contraction in the manufacturing sectors of most Eurozone nations drove broad single currency selling, financial analysts said. The weakness spread to Germany, the Eurozone’s largest economy, where manufacturing increased in August at its slowest rate in nearly two years.

Contracts for Difference Trading and Financial Spread Trading do involve a high level of risk. Investment formats such as these are margined which means that it is possible to lose more than your original stake.

You should always invest using capital that you can afford to lose; before making any trades make sure that you recognise the risk. Be aware that Contracts for Difference Trading and Spread Trading might not always be suitable for your trading strategy; where you think it is necessary obtain independent trading guidance.


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