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Publication date: 29 September 2011
Author: Mark Deans, Moneycorp

A burning building, with no exits

Julian Assange, Wikileaks founder, champion of freedom of information, and enemy of the governments of the West appears to be old news already. His memoirs shifted just 644 copies in its first three days on sale. Mr. Assange accused his publisher of releasing a draft copy without his approval. But publishers Canongate Books claimed they had his consent and insisted that the book “explains both the man and his work, underlining his commitment to the truth”. Talking of commitment to the truth, independent market trader Alessio Rastani has found instant fame – or infamy – by asserting live on the BBC that a double dip recession is all but certain and that he’s perfectly happy about the vast quantities of money he’ll make as a result of the volatility as the global economy heads, once again, into recession. Perhaps not the most sensitive of sentiments in this age of austerity, cut-backs and job losses – and not the greatest PR for his industry?

As you might expect, with the month drawing to a close, Greece remains under the microscope today. Quite simply, they need another multi-billion euro bailout package next week to avoid defaulting on their (totally unsustainable) debt. A tranche of emergency funding might allow some brief relief, but surely it’s merely delaying the inevitable?

The UK’s Foreign Secretary, William Hague, offered his sympathetic opinion yesterday, describing the eurozone “a burning building with no exits”. He went on to say that Germany would have to accept that they are going to have to subsidise weaker members for “the rest of their lifetimes”.

The euro actually enjoyed a brief rally to a one-week-high against the US dollar yesterday on speculation European leaders will do all that is necessary to aid debt-strapped regional nations, and after the European Union proposed a financial transactions tax to take effect in 2014 and raise about €57 billion a year. European governments are split over the merits of a transactions tax, while British banks warn that an EU-only measure would drive business to other regions. The UK, home to Europe’s biggest financial centre, has opposed the move, which requires the unanimous support of all EU countries. The UK Treasury reiterated that such a levy would need to apply globally. “The consensus is that anything less than a globally applied, uniform tax would distort the markets and reward dissenting low-tax regimes rather than raising significant revenue,” the British Bankers’ Association, which lobbies for the country’s banking industry, said in a statement.

Month-end is often a volatile and choppy time for currency markets, as traders look to close out positions, resulting in some unpredictable moves. Of course, we’re not helped by the lack of certainty in the eurozone and the fact that the markets are being driven more by speculation than hard facts. Data from the EU today includes German unemployment and EU economic sentiment – both of which you should expect to be negative. UK mortgage application data won’t set the world alight and will also probably be pretty uninspiring. Stateside, data of note today comes in the form of final Q2 GDP estimates. This figure is expected to show decent activity and growth, and could comfortably out-do corresponding figures from European nations (including the UK). So more dollar strength this afternoon? Don’t bet against it. Be safe, place your stop losses and protect yourself from this unpredictability. Have a good day.

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