Investors were under no illusions with either: Greece would vote anti-austerity and the resulting shambolic coalition would threaten its survival as a member of the single currency.

France would vote anti-Sarkozy and President Hollande would have as little success as his predecessor in squaring the circle of budgetary balance.

And so it turned out. Investors mimicked the obligatory reaction of shock although, in reality, they cannot have been taken aback.

The euro fell on Monday morning but it did not fall far – half a cent here and there – and London traders saw no reason to take things any further when they returned to work after the long weekend.

Amid the confusion, GBP/USD was able to sneak above its summer 2010 high to its highest level since November 2008.

The breakthrough does not guarantee further upward progress but does make it likely.

GBP/AUD was unchanged on the week while the NZ dollar lagged a negligible half-cent behind.

Australian economic pointers were reasonably plentiful. Monday’s reading of first quarter factory gate prices put them -0.3 percent lower on the quarter and up by just 1.4 percent on the year – half the expected increase.

Having seen those numbers, spread trading investors were less surprised than they might have been when consumer price index inflation halved to 1.6 percent.

Taken together, the data were enough to persuade investors that the Reserve Bank of Australia would lower its Cash Rate benchmark from 4.25 percent to 4 percent this week and by a further quarter percentage point to 3.75 percent in June.

Lower-profile statics this Monday morning played a supporting role. Private sector credit growth slowed to an annual 2.3 percent in March while HIA new home sales were down by -9.4 percent for the month.

Neither was particularly helpful but no damage was done to the Aussie dollar.

UK house price balance came on below estimates, GBP/JPY down 0.72% this morning.

General risk aversion ahead of today’s main event – the FOMC meeting where the Fed’s plans for QEII will be revealed.

In online futures contracts the yen and US dollar rule the roost with big falls Aussie and New Zealand dollar. The AUD/USD is down 0.54%, while the NZD/USD is the morning’s biggest faller, down 1.06%.

Stock market futures are indicating a very weak opening in European with indices possibly opening down 0.5%.

Come 7.15 PM London time, today’s trends could reverse or become extended with the Fed meeting.

And according to Spreadex:

“The FTSE opened slightly lower this morning, and is hovering just below the 5400 Level at 5381 down 29 points, still unable to break this level with conviction.

Tui Travel is the largest percent loser at the moment after announcing that that it expected full year profits at lower end of expectations, as consumers begin to feel the wrath of the emergency budget. But the downward pressure is coming mainly from the banks, accounting for around 30% of the loss on the FTSE this morning.

So far trading has been quiet which was to be expected given that the main event of the day is the FOMC rate decision this evening. Given that there is speculation of further monetary loosening it is unlikely that there will be any change”.

Note: Futures Contracts are often leveraged products and therefore can carry a high level of risk to your capital. With futures contracts you can lose more than your initial investment so they may not be suitable for all types of investor. Please ensure you only trade with money that you can afford to lose and that you fully understand the risks involved. If in doubt, seek independent financial advice.

However in the last week, stock markets have paused again as employment growth and economic growth in the US show little sign of acceleration. If you wanted to speculate on a recovery, what would be the best way of doing this? Similarly, if you thought another recession was on the cards, how could you trade this?

The spread trading markets could be a good way to play the recession/recovery.

During the credit crunch there was one currency pair that acted as a bellwether for the global economy and that was the Australian Dollar/Yen.

Not only does the Australian dollar rise thanks to higher demand and commodities, it also forms part of a popular carry trade whereby speculators buy Australian dollars and borrow in yen to pocket the difference.

As confidence rises, this carry trade boosts the Australian Dollar/Yen, but if things turn sour, the pair can violently reverse. It reverses in a violent way because carry trades are often leveraged (magnified). As investors unwind their positions and such unwinding is also a magnified.

Nevertheless the Australian Dollar/Yen offers a way to speculate on the recession/recovery because it may accentuate any trends in the underlying global economy. For those Day Trading, note that the Australian Dollar/Yen pair has closely correlated with the S+P 500 over the last few months.

You can speculate on the pair through Financial Spread and CFDs.

If you think the economy will recover, put simply, you could speculate on the AUD/JPY pair going up. If you think the economy will falter and even slip back into a recession then could speculate on the Australian Dollar/Yen pair going down.

Margined financial spreads and CFDs carry a high level of risk to your capital. You can lose more than your initial investment. They may not be suitable for all investors. Only speculate with money that you can afford to lose so ensure you fully understand the risks involved. Seek independent financial advice where necessary.

However, in the last few trading sessions for the forex spread trading markets, morning yen strength is no guarantee of a full day move into the yen.

Coming up today we have the rate statement and press conference from the UK’s MPC at 12.00 No surprises are expected here with rates and quantitative easing expected to stay the same as last month.

The ECB rate decision at 12.45 is also expected to provide few surprises, but the press conference at 13.30 could provide some choice quotes and spark a reaction in forex markets.

At the same time we have US unemployment claims, with a slight dip in claims expected.

Note: Futures Contracts are often leveraged products and therefore can carry a high level of risk to your capital. With futures contracts you can lose more than your initial investment so they may not be suitable for all types of investor. Please ensure you only trade with money that you can afford to lose and that you fully understand the risks involved. If in doubt, seek independent financial advice.

The gold spread trading market is rallying for the fifth consecutive day, pushing just above the $1,200 marker.

The yen has let slip its earlier dominance as the fear trade recedes. The USD/JPY has reversed it’s morning weakness and is now up 0.43%.

The Aussie dollar has also enjoyed a quick turnaround today, helped by rising commodity prices with the AUD/JPY posting a gain of 0.7%.

The most interesting moves are happening on the US dollar, today’s recovery in the USD/JPY is as much about dollar strength as it is yen weakness.

We can see this on the GBP/USD which is now on course for its first reversal in 9 sessions.

The dollar is also enjoying a very strong day against the Swiss franc, up over 1.22%. The 1.0400 level is becoming quite a sticky support level on the USD/CHF and could present future trading opportunities the next time the pair approaches this level.

Also note that any bounce off the 1.0400 rarely lasts two days, which again could present trading opportunities.

The big state-owned banks are expected to return to profit this week after a disastrous couple of years. The chancellor and the business secretary are already on their case. They are considering legislation that would reconfigure the banks as charities and oblige them to distribute their profits as hand-outs to deserving cases in the small and medium enterprise (SME) sector instead of as bonuses and dividends.

This story has been around since Labour was in power and no early conclusion is in sight; it will run and run. As will the double-dip-recession story.

It received another airing over the weekend after US figures for the second quarter of the year showed slower growth than economists had predicted. Gross domestic product (GDP) expanded by an annualised 2.4% in Q2; less than the 2.5% the market had been expecting and way below the 3.7% it achieved in Q1. (Expressed as an annualised rate Britain’s economy expanded by 4.5% in Q2.) In one sense it was positive that the Q1 figure was a big upward revision to the 2.7% previously announced. In another it was negative that the economy could be slowing so rapidly.

The day’s two other US economic statistics went some way to offsetting disappointment over the GDP figure. The Chicago purchasing managers’ index (PMI) went up by more than three points to 62.3 and the University of Michigan’s index of consumer confidence improved from 65.5 to 67.8. Except that it didn’t. The previous month’s 65.5 figure was revised upwards to 76, so confidence actually fell.

As did the US dollar on the financial spreads markets. Although it failed to lose any ground against the yen or the euro it headed lower against almost everything else.

In the CFDs markets, sterling added more than a cent in the three hours between the GDP announcement and teatime.

The Australian, Canadian and New Zealand dollars did even better. The success of those ‘commodity’ dollars is perplexing, given the background talk of double-dip recession in the United States. It appears that investors have compartmentalised the US economy as a little local difficulty and that they expect growth in Southeast Asia to keep the global economy on the track to growth. It is impossible not to be suspicious of this convenient logic.

Figures from Australia this morning certainly do not tell a convincing story of irresistible progress. The AiG performance of manufacturing index (think of it as a PMI) was a point and a half higher at 54.4 in July while new home sales fell by -5.1% in June after a -6.4% drop the previous month.

Apart from Swiss retail sales nearly every other ecostat today is a manufacturing PMI. Those for Switzerland, Britain and the United States are expected to be lower in July; the EU figure should be an improvement. If that is indeed how the numbers pan out it could be another day of unfulfilled ambition for sterling/euro.

For a month it has struggled and failed to make it above current levels. A disappointing PMI this morning will not help its case.

By moneycorp.com

The banking sector was also helped by rumours that the banking regulator Basel committee looks set to lower its minimum capital and liquidity requirements.

BP is also in the news after posting a headline loss of $17bn for Q2 as well as confirming the replacement of Tony Hayward with Bob Dudley.

The decision to set aside a provision of $32.2bn to cover the costs of the oil spill is clearly intended to front load any costs so that if there are any further write downs in future quarters, the effect of them will be fairly diluted.

The resignation of Tony Hayward is clearly intended to draw a line under the events of the last few months in order to prevent the CEO becoming the story. His replacement Bob Dudley will be charged with repairing BP’s tarnished image within the US and recent events seem to be clearly reflected in the recent share price moves.

On the downside InterContinental Hotels is leading the fallers after it emerged that the Barclay brothers, the owners of the Daily Telegraph, have sold their 10% stake in the Holiday Inn owner. Shares in Whitbread, the Premier Inn owner have also fallen.

US markets opened higher led by DuPont after the company beat earnings estimates by some way coming in at $1.17c a share against an expectation of $0.94c, while the S&P500 is looking to break above its 200 day moving average and 50% retracement of this years fall from the highs at 1,220 to the lows at 1,011 at 1,115.40.

A weekly close above these levels could well signal further gains towards 1,140 but that may well depend on this Friday’s US Q2 GDP figures which given the recent economic data could well have the capacity to disappoint the market, and come in under expectations of 2.5%.

In currency markets the US dollar has continued to fall against the single currency, and the pound as positive UK CBI industrial trends data came in way above

expectations at a 39-month high of +33% from -5% in June with the pound hitting its highest levels against the dollar since February, However it needs to close above its 200 day moving average at 1.5556 to really push on towards 1.5870. This could also be reflected in the UK spread trading markets.

US consumer confidence for July again disappointed falling to 50.4 against an expectation of 51 showing that the US markets appear to be more interested in company earnings than current macro economic data.

Futures Contracts like FX, CFDs and Spread Trading are leveraged products. They carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved. Seek independent advice if necessary.

Article written by CMC Markets analyst – Michael Hewson.

This research is indicative and provided for information purposes and must not be relied upon as investment advice.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

Having started off from R11.7 last Monday the pound moved lower and was never able to regain that level. It rebounded from a low of R11.32 on Thursday and was back up to R11.45 by the time London opened this morning.

The rand’s performance against sterling was not as strong as that of the New Zealand or Australian dollars but it was positive enough. All of them did well as a result of greater confidence among investors that the world’s economy really is on the road to recovery. Britain’s strong GDP figure helped that impression, as did a series of positive data from the euro zone.

Also working in favour of the commodity-related currencies were the rising prices of the commodities spreads themselves, with the CRB commodity index rising by 1.8% on the week.

The main event for the rand was the South African Reserve Bank’s Monetary Policy Committee meeting. The MPC decided to keep its Repo policy rate unchanged at 6.5% and the Prime rate at 10%. In its statement the MPC said it expected ‘ to stay within the inflation target range for some time.’ A final rate cut cannot be ruled out but the tone of the SARB suggests it is unlikely.

That strong GDP figure could give sterling a further boost this week but it is also positive for the rand, in that it reinforces the notion of a recovering global economy. Buyers of the rand should continue to hedge 50% of their requirement.

By moneycorp.com