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2/7/2008 − the current market sentiment
Wed, Jul 2 2008, 11:46 GMT
by Walid Salah El Din
The greenback has found footing by the release of June US non-farm payroll which is expected to be -43k next Thursday as a long weekend on the fourth of July holiday. The greenback could found support from an unexpected expansion number of the US ISM manufacturing index which has come at 50.6. A number above 50 means expansion and lower than 50 means contraction.
In this same time the manufacturing PMI of EU of June came at 49.2 and in UK the manufacturing CIBS came massively down to 45.8 amid national wide houses prices decline by the biggest year to year decline by -6.3%. These dovish housing data came after a drop of the mortgage approvals to 42k in May from 58k in April. The continued declines of the housing market of UK is expected to put further weights on the BOE to cut interest rate again in spite of the current high inflation rates which are fueled by the new high oil prices currently. The stagflation risks in UK are actually the strongest among the G7 recently.
The single currency is still facing the same resistance just above 1.58 versus the greenback as this week interest rate hike has become fully prices with expectation of further tightening to come if there was no use of this one in the face of the inflation which forms a real appreciated risk by the ECB. Last month HICP has reached 4% and the central bank target is just 2% and this rate can go up further by wages hiking requests in the face of the continued high energy and commodities prices which can threat the price stability over the medium term.
We wait today for US ADP employment index which is expected to be lower by just 1000 jobs. The indicator is important as a clue of the labor market performance by the release of the full US labor report of June tomorrow. Also we have US durable good of May which is expected to be unchanged from April and US factor orders of May which is expected to be positive by .5% from 1.1% increases in April.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
Published on Wed, Jul 2 2008, 11:48 GMT
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