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11/4/2008 − the current market sentiment

Fri, Apr 11 2008, 06:27 GMT
by Walid Salah El Din

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The USD has reacted strongly on the very better than expected initial jobless claim figure which declined by 53k to 357k from 407k in spite of the widening of the US trade deficit to 62.32$ b in February pushing the EURUSD lower than 1.58 after its recording its all times high at 1.5913 by the ECB meeting yesterday which kept the interest rate unchanged at 4% 

Trichet press conference after the ECB decision to keep the interest rate unchanged at 4% has shown how much the ECB concerns about inflation. Trichet has confirmed the inflation upside risks over the short term underpinned by the high energy and food prices and there should be avoiding of the inflation second round effect and also the wages and prices which can go higher above expectations. So each party should meet his responsibility to avoid this and in his n his talking about growth, he has mentioned that GDP growth is to be moderated and there is ongoing market correction and high level of uncertainty currently. There was no new for the single currency from his speech as the current EU inflation worries are fully priced in the market on these same reasons he has mentioned. He has repeated that excessive volatility in the forex market is undesirable.

We are ready to have the same EU criticism that the Chinese Yuan is under valued and should reflect fundamentals and the Japanese yen fundamentals are better than what's pricing in the currency markets at the G7 meetings in Washington today which is the most waited event of this week.  The meetings are expected to extend during the weekend for curbing the current turmoil and for giving back certainty to the markets after the IMF downgrading the global growth expecting the US growth this year to be just .5% from its earlier estimate of 1.5% earlier this week. The downgrading came on the problems of the US housing market and crediting problems resulted from it and what's most related to it.  By god's will we are to have a coinciding meeting of the IMF too during the weekend.

The markets are clueless by the meeting and there is no clear direction.

Published on  Fri, Apr 11 2008, 09:19 GMT