We are well into to 2010 and it looks like spread traders are enjoying the market conditions. This despite the markets looking rather indifferent.
According to Simon Denham of Capital Spreads, “it’s interesting that the day we saw our clients making large profits, in fact one of their best days ever, the markets didn’t move much. That simply indicates the size of the positions held”.
Despite some good times for those with spread betting accounts, the UK’s exodus from the recession has not been strong.
The UK recession has been a bit of a curate’s egg. The majority of the population is still gainfully employed. They are also enjoying monthly-outgoings that are substantially lower than in times past due to the extremely low interest rates which are reducing mortgage payments to almost unheard of levels.
Nevertheless whilst most of the UK seems to be winning we need to bring the losers into the equation. And it is the UK economy itself that is the bad section of the egg. The economy and UK public purse are still in trouble.
UK GDP just about saved Alistair Darling’s bacon when it came in at +0.1%. Although that miserly growth will seriously dampen the incumbent administration’s hopes for re-election. With many other nations’ economies climbing steadily out of the mud, the half hearted GBP figure will not go down well.
Yes, it is positive, however economists know only to well that productivity increases will have been more than this. That means that the chances of any swift dent in the jobless numbers will be slim.
Whilst inflation is still a potential problem, it is only a potential problem. Low growth suggests that interest rates will be kept low. Good for mortgage holders. Not so good for the Pound.
In addition, the rather expensive Quantitative Easing programme looked like it was on the way out. Although with such low growth, and the risk of dropping back into second recession, stopping QE may not be in Darling’s immediate plans. If so, that could be good news for equities but bad news for both long term gilts and for the beleaguered Pound.
If the Pound continues to weaken then the GBP/USD market could be worth researching further. If we see a breach of the $1.61 area then there could be a quick return to the lower areas of the current eight month trading ranges around $1.56/1.59. And from there it’s anyone’s guess if the UK continues to look weak.
Please note though, if you are spread betting on the currency markets you can lose more than your original stake or investment. Make sure you familiarise yourself with the risks involved. Spread bets carry a high level of risk to your capital. Before trading, please ensure that spread betting matches your investment objectives. If necessary, seek independent advice.
The author based in the heart of the City. Peter Jones is a seasoned commentator on the financial markets including the share trading and spread betting markets.
