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30/5/2008 − The Current Market Sentiment
Fri, May 30 2008, 11:39 GMT
by Walid Salah El Din
The oil price easing has given support to the greenback this week. The greenback has been underpinned by April durable goods excluding transports have risen by 2.5% and the broad figure has declined by just .5% and the market was expecting a decline by 1%. The US GDP Q1 preliminary reading came at .9% and it was expected to be 1% with core PCE at 2.2%.which came actually at 2.1% and we have today April core PCE which is expected to be 2.1% y/y again. the PCE is preferred inflation indicator of the Fed.
The British pound is still under pressure as the slump of the UK housing prices by 2.5% m/m in May and 4.4% yearly. The data added concern about growth and low demand in UK and highlighted the need for cutting interest rate again soon to stem of this decline.
The single currency has found difficulty to stand above 1.55 after the weak germane employment data. Also the unemployment rate increased in May to 7.9% from 7.8% in April with positive unemployment changes by 4k and the market was expecting -20k. Today we have seen May HICP flash release soaring to 3.6% again after decreasing to 3.3% in April. The inflation data ensure the inflation pressure in EU and the need for fighting it which can diminish any prospect for easing to spur investment and increase the possibility of a rate hike by the end of this year if this pace of inflation persists. This can support the single currency with no criticism from the ECB and EU official as it can lower the increased inflation upside risks.
Now, the stagflation threats have increased in all of US, UK and EU too. As the high energy and commodities prices amid growth slow down facing all of these economies. The interest rate in not expected to be changed soon. The market is waiting for getting out of this spiral which cause a slow down in consuming spending and business spending and increased demand for gold as the pessimism and slow growth which lower the appetite for taking risk.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.comPublished on Fri, May 30 2008, 11:42 GMT
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