• Home ::
• Technical ::
• Market View ::
• Market Thoughts

• Send
• Print
• Add To
• Rss

Market Thoughts

643767e7-0274-469d-9f84-fd920d1b2a49

0

0

25/4/2008 − The Current Market Sentiment

Fri, Apr 25 2008, 07:06 GMT
by Walid Salah El Din

FX Recommends

The greenback is still holding its gains across the broad after the increased the anticipation that we are at a close end of the Fed's interest rates cuts cycle. This monetary easing cycle has started last September putting pressure on the greenback making the US assets less attractive increasing the liquidity which is seriously needed by the financial market which has had huge loses in US, UK and EU too because of the credit problems which triggered by the loses of the sub-prime mortgage bad loans and the slump of the US housing market which is still on. Yesterday, we have had new weak new home sales decline by 8.5% in March too. The figure was the lowest since 1991 It is clear to the market that there are no signs yet for a close end of this continued slump. 

 A close end of the Fed's interest rate easing policy could contain the market sentiment recently in the face of the continued inflation upside risks but it is still unreasonable as there is no improvement especially in the housing market and after 3% of cuts since last September but what underpins this prospect is the inflation pressure in US amid the current high oil and commodities prices which export inflation to US from another side.

The inflation pressure is looking tackling the easing actions eroding its impact to spur investment lowering the demand and growth.  These current inflation rates amid the expectation of a mild recession this year increase the sinking in stagflation which is hard to be overcome at these current oil prices and low value of the greenback.

The single currency is still under the pressure of the disappointing IFO business climate figure which has fallen from 104.3 in March to 102.4 in April following the flash disappointing figure of April PMI manufacturing which 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 demand of US and the fear of recession. The data is looking starting to come weaker from the Eurozone and this may be in a slower pace than the case in US and there is a bigger probability to have contracting PMI number soon.

The single currency had another hit from Noyer statement to  the Wall Street Journal that nobody knows to predict the future of the interest rate denying his expectation of a coming  interest rate hike for fighting inflation. A signs of divergence Stoch of its recent high at 1.6014 could put more technical pressure at the pair after a repeated failure to stand hold 1.6. The support at 1.571 has fallen and also 1.5671 and now, the next support is 1.551then the major one at 1.5339.

We have today from UK for Q1 GDP which is expected to be 2.6% y/y from 2.8% and .4% q/q from .6% last quarter and from US, we have UN Michigan consuming sentiment which is expected to come lower to 63.2 from 69.5

Best wishes

FX-Recommends

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

Published on  Fri, Apr 25 2008, 07:07 GMT