Another day, another kicking for the Euro! This time it was caused by the German government banning naked short selling of 10 of its financial institutions and CDS in euro denominated government bonds until 31st March 2011. With what is looking like a more and more fractious Monetary Union, confidence in the currency is nonexistent, causing it to hit a low of 1.2145 against the Dollar overnight, levels which have not been seen since April 2006. Only the very brave and the fool hardy are trying to pick the bottom of this move and ignoring the age old adage of the trend is your friend.
Sterling in all honesty, is not faring much better against the dollar either, with it trading down to 1.4237 in this morning’s session, and with the lows of 1.3500 seen in January of last year coming into sight, further depreciation of the currency would not come as a huge surprise. The one saving grace may be the high inflation numbers that were published yesterday, with RPI hitting 5.3% and CPI up at 3.7%, the Bank of England may be starting to think about raising Interest Rates to cool inflation, which has been caused by ousted Labour government’s fetish to print money.
The indices are not faring much better either, with the FTSE down 137 points at 5168 this morning. It seems that all the buyers that were out looking for a bargain in the last week have positioned their money, leaving the bears to go back to doing what they do best and squeeze the market lower.
Finally, Gold may be $30 off its recent highs, currently trading at 1216, however with its combined attributes of a hedge against inflation and a safe harbour in a financial storm of uncertainty (the VIX is currently on a strong upward trend trading at 33), further buying of the commodity almost seems inevitable.