Article / 01 October 2012 at 15:16 GMT highlights: France goes berserk on austerity

Editor / Saxo Capital Markets UK
United Kingdom

MACRO: France goes berserk on austerity


Steen Jakobsen, Chief Economist at Saxo:

“This week the socialist government in France went berserk with austerity and tightening measures. This could put the country’s recovery at serious risk and perhaps President François Hollande may need to re-read the economic page on ‘fiscal multipliers’ – if no book is available the S&P Rating Services offers a sanguine view on page 5. The study proves how the fiscal multiplier in Spain has been closer to 6 to 1, rather than 1 to 0.5% rule which IMF applies. In the case of France we have an economy with low rates, an expensive labour market and now a new marginal tax of 75% - everything being equal will that lead to lower or higher growth?  I think you know the answer, even without 5 years wasted at a university becoming an economist.”

CURRENCIES: AUDUSD at huge pivot ahead of RBA meeting


John Hardy, Head of FX Strategy at Saxo:

“Tonight the Reserve Bank of Australia (RBA) will offer its latest rate decision and forward guidance. Long ago, the interest rate fundamentals have argued for a much weaker Aussie, but the market has resisted the signal due to the recent positive effect of multiple fresh QE injections - including the European Central Bank’s conditional intervention promise, the Fed’s QE3 and the recent Bank of Japan’s efforts - on commodities and risk appetite. Now, risk has come off a bit, and this week will tell us whether that ‘bit’ turns into a deeper sell-off and whether the RBA will send guidance even lower. ”

COMMODITIES: Gold held in ETFs hit new record; futures positioning catching up


Ole Hansen, Head of Commodity Strategy at Saxo: 

“Gold held by Exchange Traded Funds rose by 10.55 metric tons to a new record of 2,545.35 metric tons (MT) according to data collected by Bloomberg. This was the ninth week of increased exposure during which time some 152 MT have been added. Speculative investors through futures and options have been busy catching up and have over the last six weeks alone increased their net long position by 362 MT, which is only 170 MT from the July 2011 peak at 900 MT. Silver, meanwhile, has seen flows slow down as we approach the record peak of 18,640 MT in April 2011, from the current level of 18,627 MT. Meanwhile, gold is testing the 1791 resistance level ahead of 1803. The jump in gold has been attributed to Chicago Fed president Charles Evans who on CNBC today spoke of the need for more accommodative policy by the Fed.” 

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