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Arrivederci Silvio - you will not be missed

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Arrivederci Silvio - you will not be missed

Postby Eurusd Trader » Wed Nov 09, 2011 6:17 am

Losing his parliamentary majority during a routine vote on budget matters, Silvio Berlusconi looks to be leaving centre stage of Italian politics. A controversial leader for many years and one who never addressed the structural reforms needed for Italy to combat its enormous debt burden.

Markets reacted to the announcement of his departure with relief – or was it hope? Stock markets as well as EURUSD. Investors’ confidence will be tested today when Italian bonds are traded again. Yesterday’s 10 year yield at 6.75% did not look good.

With 2 trillion Euros of debt – Italy has a long way to go to get their house in order. But it will be a difficult task as Italy has rigid labour laws and social welfare benefits people don’t like to lose.

The new prime minister should be one to look to France – where reforms and cuts are implemented and now start to pay off. Not to the general public’s liking – but very much needed.

Some important inflation data were released in China overnight and the 5.5% inflation rate could open up for easing of monetary policy to support growth. The slowdown in Chinese growth as seen over the last quarter has been a worrying sign for the global economy. Monetary easing might reverse that trend.

A rather thin economic calendar for the euro-zone as well as US means focus on the old problems feeding markets – EU debt problems at the top of that list.

EURUSD has had a remarkable tight range over the last week. Give and take a few pips, the 1.3650 to 1.3850 range is far less than that normally seen for a week.

It likely will not last for long and the question is of course which way it will move. I felt yesterday would maybe set the stage for a move – but NO – EURUSD was pretty much capped despite Italy taking centre stage. It’s tempted to say that we will make a move today – but it is hard to point out the indicators supporting this for today.

Scalpers have had some easy trading days throughout this calm period. Almost anywhere you entered looking for 30 pips, you would get them within reasonable time – and you could repeat this a few times daily. But watch out – don’t get too used to it. This market has never lacked indicators or data or news to trigger moves. Sometimes they come when you least expect it.

Enjoy peace and tranquillity while it lasts.
Eurusd Trader
 
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