Intraday Market Thoughts

Euro Pressured as France. Italy Eye Spending

by Kyle Morrison
Aug 12, 2011 9:14

Europe uncertainty continues as Merkel and Sarkozy arrange to meet next week, French GDP expected to slip, Japanese industrial production, Italian trade balance to widen as Italy argues about austerity, US retail sales, gold rebounds after margin hike. Friday's 10 Premium trades have seen all limits hit in our S&P Mini & Dow-20 futures. EURUSD, GBPUSD positions are in the green.

The uncertainty surrounding the situation in Europe looks set to continue into next week after German Chancellor Angela Merkel and French President Nicolas Sarkozy arranged to meet to discuss the current crisis on Tuesday. In the meantime Sarkozy has ordered his ministers to come up with new spending cuts in the next week.

Today's release of Q2 French GDP numbers showed the growth was unchanged from Q1 instead of expected 0.3% from 0.9% in Q1.

In a separate measure individual EU regulators agree to ban short selling in another desperate move to contain the volatility in markets this week.

Our Friday Premium trades (posted 5 hrs ago) include 10 new intermarket plays with GBPUSD finally added to the mix. Click here to go straight to our 3 intermarket charts & 10 trades Non-members can join here:

Italy is facing similar problems in having to agree new austerity measures in return for ECB bond buying so that their bond yields return to more sustainable levels. The 10 year yield continues to remain stubbornly above the 5% level. Italys trade deficit numbers for July is expected to increase to 2.5bn, while unions and the governments coalition partners express unease at the loss of control in the countrys fiscal affairs, in exchange for ECB assistance.

Yesterdays US trade deficit number was a shocker, widening to $53.1bn well outside expectations of $48bn. This continues to show that despite a weakening US dollar the balance between imports and exports continues to widen, suggesting a further downward revision of Q2 GDP. Weekly jobless on the other hand came in better than expected at 395k and the market chose to focus on that and with that in mind it is hoped that US retail sales for July will also surprise in a positive manner.

Gold slumped the most in seven weeks after the CME hiked margins by 22%, sliding back from a new all time high of $1.815, before rebounding from $1,733. While further declines may be possible, longer term gains look likely given the uncertain outlook in both the US and Europe.


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