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20/5/2008 − The Current Market Sentient
Tue, May 20 2008, 17:48 GMT
by Walid Salah El Din
The single currency has found support today from the unexpected rise of the germane ZEW current conditions index to 38.6 in May from 33.2 in April. May germane ZEW has declined slightly to -41.7 from -40.7 in April. Also the Germane PPI of April has risen to 5.2% y/y from 4.2% in March and monthly by 1.1% from just .5% in March. The data show a strong inflation pressure at the producing level which can transfer to the consuming level. Currently, the EU is suffering growth slow down and strong inflation pressure as the current high oil and commodities prices. From another side the US recession expectation and slowing demand is affecting negative on the EU. That's beside the strong Euro which tackles the EU exports to US.
From another side the greenback was under pressure across the broad as the new high of WTI above 129$ per barrel. The current high oil prices is slowing the demand and the Fed's stimulating easing cycle effect which can threat the US growth further and put renewed pressure on the greenback to get as it makes the recovery after the crediting crunch harder and cause a dovish consuming sentiment. We wait tomorrow for the minutes of the Fed's last interest rate decision meeting when the fed has cut the interest rate by just .25% in a split decision as there were an opposing from Fisher and Plosser who were preferring holding with no change. We want to know more about their inflation upside risks evaluation especially as the oil prices have surpassed the 120 level.
The gold could hold its gains above 900$, on the new highs of the crude oil as it fuel the inflation pressure lowering the value of the greenback weighing on the growth and dampen the investing cooling the growth and increasing the demand of it as a reserve. The equity market can face difficulties on this current market sentiment persisting. The stagflation fear is looking emerging again making the previous metal much attractive.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
Published on Tue, May 20 2008, 17:50 GMT
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