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24/4/2008 − The Current Market Sentiment

Thu, Apr 24 2008, 07:13 GMT
by Walid Salah El Din

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The single currency is under pressure as the flash disappointing figure of April PMI manufacturing came lower than the market expectations of 51.6 at just 50.8 increasing the market worries about the strong single currency negative impact on the manufacturers and the side effect of the slowing down in US.

From another side Noyer told the Wall Street Journal that nobody knows to predict the future of the interest rate.

Yes, the data is looking starting to come weaker from the Eurozone and this may by in a slower pace that US. There is a bigger probability to have contracting PMI number soon.

There is market talking about a close end of the Fed's interest rate easing policy but it is still unreasonable as there no improvement especially in the housing market and after 3% of cuts since last September and what underpins this prospect is the inflation pressure in US too and the need of fighting it but if there is no signs of actual growth improvements yet and there is an expectation of a mild recession in 2008  what  about the impact of these cuts and providing liquidities processes on the inflation at the current commodities and oil prices which is looking persisting and not enough for some OPEC members as Iran. After the end of Iraqi war the low interest rate pushed the demand for oil amid increased needs from china to more than 50$ per barrel and above 80$ per barrel by an end of that Fed's tightening policy which has topped out at 5.25% reaching 2.25 in less than 6 months. The inflation pressure is looking fighting the easing actions eroding its impact and lowering he demand and growth from another side as these current inflation rates amid this recession which make it difficult to be overcome and it is obvious to the pundits that even at a success of these actions, what can the greenback buys at this point this time at this solid inflation pace. The greenback might have a place to breath recently under a seen pressure from the G7 seven of holding the greenback at least around the current level after what they have called an excessive volatility in the forex market and it has to stop.

The next support of the single currency versus the greenback now is 1.571 then 1.5671 then 1.551 with a sign of divergence Stoch of its recent high at 1.6014 can put more technical pressure at the pair which has a repeated failure to stand hold 1.6.

We have today what might be the most important indicator from US this week which is the new home sales of March which is expected to be .58m from .59m in February and also from EU the germane IFO business climate of April which is expected to edge lower to 104.3 from 104.8 in March and from UK the retail sales of March which is expected to decline by .3% from a rise in Feb by 1%.

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Walid Salah El Din

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Published on  Thu, Apr 24 2008, 07:14 GMT