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17/4/2008 − the current market sentiment

Thu, Apr 17 2008, 07:11 GMT
by Walid Salah El Din

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The single currency stands near its all times high at 1.5976 versus the greenback which recorded yesterday amid accumulated inflation pressure in EU eliminating the chance of cutting interest rate in EU soon or may be this year. The data came ensuring what has just been said by ECB member Mersch which indicated that the interest rate will be held at 4.0% till the end of the year on the current inflation outlook for keeping prices will anchored.

EU Mar HICP came above the market expectation of just 3.3% to 3.6% y/y which is the high of 16 year and 1% m/m. the core HICP came also higher at 2.7% y/y and .9% m/m and the market was expecting the core to be 2.4% y/y and .6%. In this same time US Mar CPI came lower than the expectations of .4% to be just .3% m/m and the core figure came at expected 2.4% from 2.3% in Feb.

The data show the increased  inflation outlook in the Eurozone underpinning the current ECB stance of holding interest rate unchanged for fighting inflation in spite of the needs of cutting for spurring growth while the FED is still going on cutting interest rate as the market is waiting for not less than another .5% cut from its meeting by the end of this month weakening  the greenback versus the EUR as the current US  interest rate differential outlook comparing to the single currency.

The greenback was also negatively impacted by no signs of rebound in the housing market as the housing permits slumped to 927k from 984k and lower than the market expectation of just 980k also the housing starts came lower than 1m to be just .947m and the market was just expected a decline to 1.02m from 1.065m in Feb. the data underpin the prospect that the bottom has not come yet adding more pressure on the greenback.

The gold has got the waited boost from the higher than expected inflation rates in EU and also the current records highs of oil prices which is underpinned by decreases of the US inventories for the second consecutive week as it has slumped to 2.3m and the market was expecting an increase by 1.8m after the previous weekly decline by 3.2m. The gold reached 948.3 after the US EIA oil stocks data and it is now hovering above 940$ just shy of the next resistance where as the lower high at 955$.

We have today from US April Philadelphia Fed Business Survey which is expected to be -15 from -17.4 in March and Mar leading indicators which is foreseen to be positive this time at .1% after Feb slump to -.3% and also the current volatile weekly  jobless claim figure which declined from 407k to 357k recently. It is expected to be 375k last week.

Walid Salah El Din

E-Mail: mail@fx-recommends.com

Published on  Thu, Apr 17 2008, 07:21 GMT