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16/6/2008 − the current market sentiment
Mon, Jun 16 2008, 13:46 GMT
by Walid Salah El Din
No new statement from the G8 finance ministers concerning the greenback depreciated value and its impact on the global inflation upside risks currently have disappointed the greenback which has had another hit from today's weak NY June manufacturing index which came negatively by 8.68 and the market was expecting just -1.5. The treasury secretary Paulsen's comments have helped the greenback when he said that he would never take FX intervention off the table and the market was waiting for further aggressive announcement from this meeting but it was just the repeated mantra that he is still supporting the strong dollar policy and the US economic fundamentals are good.
The greenback was supported recently by the market expectations of an end of the Fed's monetary easing cycle after the Fed's President Bernenke had indicated that the inflation upside risks which resulted from the dollar weakness causing concerns to the fed. The fed's cuts which were needed to stimulate growth after the credit crunch which resulted from the housing slump which triggered from the sub-prime mortgages bad loan have increased the greenback liquidity which affected negatively on its value and attractiveness. We wait later today for Ben Bernanke's speech which may give what's new after his recent optimistic speech that the policy is well positioned and the economic conditions are to get better in the second half and to go up in 2009 but the growth risks are still to the downside.
From another side today's release of the EU HICP of May which came at 3.7% from 3.3% in April highlighted the need for the mentioned interest rate hike next July supporting the single currency across the broad. The ECB has shown its inflation concerns and its readiness to act to reinforce the price stability over the medium term. The ECB inflation target is just 2% and the rate comes out each month well above 3% this year fueled by the high oil and commodities prices and today's release of May was the highest among them all at 3.7%.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.comPublished on Mon, Jun 16 2008, 14:00 GMT
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