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5/6/2008 − The Current Market Sentient
Thu, Jun 5 2008, 14:39 GMT
by Walid Salah El Din
A massive change has happened to the single currency outlook over the short term today after very hawkish comments from the ECB president Trichet in his press conference after the ECB decision to hold the interest rate unchanged. Trichet has hinted that there can be a rate hike for stalling price stability over the medium term after the increased threats of inflation recently which can expose the Euro zone to a second round effect of inflation which is desirable and should be frightened. The comments were clear enough to spur EURUSD buying pushing it above 1.55 after Ben Bernanke's comments which derived the pair lower earlier this week.
The fed chairman has said that the policy is well positioned which hinted that there can be no further cuts and he has added that economic conditions are to get better in the second half and to pick up in 2009 but the growth risks are still to the downside but he is worried about the high inflation rates amid the current high energy and commodities prices and the weak dollar levels which were negatively impacted by the cutting interest rate which lowered its yields making it less attractive.. The comments were optimistic enough to push the greenback higher. His saying that the policy seems well positioned could change the current priced interest rate outlook which was not taking off further cuts to come soon.
Now, the market is waiting for tomorrow US non-farm payroll of May after the optimistic release of May ADP could underpin the greenback from another side by the release of the non-farm payroll of April. May ADP was expected to be -30k and it has come positively by 40k surprising the market.
The British pound was under pressure today trying hardly to follow the single currency versus the greenback but the release of Halifax May house price index decline by 2.4% dampened it after the release of mortgage approvals which reached to 58.000 in April from 63.000 in March which is nearly the half of last year number of April which was 113.000 showing how much are the bad conditions of the housing market of UK currently which can continue as this current dovish market sentiment.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
Published on Thu, Jun 5 2008, 14:43 GMT
Archive
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