• Home ::
• Technical ::
• Market View

• Send
• Print
• Add To
• Rss

Market Thoughts

b6200aab-aee1-48e5-8dd0-bb52db44295b

7

0

17/11/2009 − The Current Market Sentiment

Tue, Nov 17 2009, 05:15 GMT
by Walid Salah El Din

FX Recommends

Today's Ben Bernenke's talking about the greenback was exceptional and caused a spike in the forex. Ben Bernenke has assured the monetary policy following of the strong dollar policy and caring of the inflation upside risks which can result from the dollar weakness versus the commodities and energy prices which can tackle the fed's stimulation package from another side. Ben Bernaneke has assured today that the price stability is very important to the fed as the unemployment and the current struggling growth rates. Previously, Greenspan was the talker about the interest rate and the John Snow the former treasury secretary was the talker about the dollar, so today Ben Bernanke's speaking about the dollar has been read as a try to support barrack Obama's Asian visit and his efforts for a stronger Yuan exchange rate and that's why it has been a short lived spike and the greenback came back down across the broad giving back his quick gains quickly as it has made it as the market has lessened an actual action possibility from the fed concerning this proposal right now but anyway it looked like a sign to the market to prepare it of an ending the current quantitive easing policy in appreciation of the recent economic improvement and storing the price stability and this talking from the fed was not discounted before.

The greenback has opened the week in a repeated defensive position versus the gold which is widely expected to reach 1200$ right now as there is no action yet for staving off the current stimulating easing steps which can build up inflation upside risks as the commodities and energy prices are still supporting the gold rally.

We have seen the greenback negatively impacted today too by the US stocks rising which were dueled by stronger than expected October retail sales figures coming up by 1.4% broadly monthly while the market was waiting for just .8% after a drop in September by 1.5% which helped the stocks to open up in spite of NY manufacturing index of November which came at 23.51 while the market was waiting for 31 from 34.57 in October increasing of the investors' risk appetite which can load further carry trades actions. Dow closed above 10400 making a new high of this year and S$P 500 could close too above 1100.

Last week, G20 Fin Ministers' ignorance of the greenback weakness is still contained in the current market sentiment when they have referred to the new greenback feature as a funding currency of the carry trade investing transactions as its current very low interest rate level and the current held quantitive easing policy by the Fed which is seemed to stand longer waiting for a crucial materialized change of the US labor market as it has announced previously in its statement after holding the interest rate unchanged that in spite of the recent improvement of the economic conditions and the better than expected growth rate of the third quarter, the economy is still in need of all of its easing stimulating policy steps further for storing confidence and improving the labor market conditions which can suffer further next year expecting the unemployment rate to get over 10%. So, By God's Will,  it is important to watch next week FOMAC recent meeting minutes announcement looking for a tendency of ending this current quantitive easing policy

The Fed's worries about the employment and this halting recovery were widely expected and there was no a major change in the market as expected but we have seen the labor market is still struggling in the Labor report release of October which included a revising up of the non-farm payroll of September by 63k but in the same time, we have seen an increasing of the unemployment rate to 10.2% and another increasing of the non-farm payroll lost jobs by 190k and the market was waiting for losing just 175k which were not far from the market expectations. The market has got out of that that the easing monetary policy is to be hold further and the G20 Fin Ministers' statement language contained this same meaning which caused the current weakness of the greenback versus the Gold and the other higher yielding currencies such as the Australian which is pushed up by the Chinese strong growth rates and its demand for the Australian commodities and the higher interest rate outlook differential currently after the RBA recent 2 meeting hikes by .25%. The Aussi is trading now well above .93.

God willing, it is important to wait today for October UK CPI which is expected to be up by .1% monthly after an unchanged rate in September and yearly by 1.5% from just 1.1% in September broadly and excluding the food and energy it is expected to be 1.7% as the same rate of September recently Marvin King has indicated  in the BOE quarterly inflation report that it is expected to have volatile rates in the next months because of the rising of the energy and commodities prices but it is expected to be below 2% over the medium term and from US, we wait for US October PPI which is expected to be up monthly by .4% broadly and by just .1% excluding the food and energy. We wait also for US September net long term TIC flows which are expected to be 27.3 from 28.6 in August.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Tue, Nov 17 2009, 05:15 GMT