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4/8/2008 − The Current Market Sentiment

Mon, Aug 4 2008, 09:09 GMT
by Walid Salah El Din

FX Recommends

The greenback is still keeping pressure across the broad after last week better than expected release of US non- farm pay roll of July which came at -51k versus the market expectations of -65k. The data kept the single currency which suffered from the release of manufacturing PMI at 47.4 in July after a flash reading at 47.5 and 49.2 in June under 1.56 versus the greenback. The manufacturing data have come after series of weak EU data like the recent IFO weak figures which have shown a struggling business climate in germane which can effecting negatively on the single currency which is already suffering a technical pressure versus the greenback after forming another lower high at 1.575 after 1.5935 and 1.6023 putting technical downside pressure on the pair.

It looks that another ECB hike is getting off the table and it can pay much attention to the growth downside risks. Jean Cluade Trichet has said it clearly after the recent ECB meeting when it has hiked by .25% in the face of the inflation to settle price stability over the medium term when the oil prices were well above 140 by referring to the downside risks currently and the sluggish growth of the second quarter after good data in the first quarter which can tackle further tightening actions in appreciation of the growth down side risk which triggered a profit taken wave after the hike and now it is getting better in US and in my view the ECB can not go tighter than that before a realized improvement in US if it is not a beginning of tightening back again in US which can give support to the greenback versus the single currency.

We have this week Fed's interest rate Meeting decision and the market is in need to know the Fed's assessment of the current economic stance in US after the oil and commodities prices easing and the existing struggling growth figures and weak labor market which is still losing jobs.

The cable is still under the pressure of the weak manufacturing CIBS of July which has reached 44.3 well below 50 in the contracting territory. This weak number has come after the recent UK mortgage approvals of June which have came at just 36k and the -36 of the UK retail sales CBI of July which could give enough pressure on the cable to sink below 1.991 as it has reduced the expectation of a new MPC split decision or even if there is a vote for hiking in the face of inflation again, it is hard to have a majority to hike interest rate amid the current decline of the commodities and oil prices which trading for the second week below 130$ a barrel as the serious needs of interest rate cut to spur investments and consuming currently.

We wait later today for the release of US June personal income which is forecasted to come lower to -.1 from 1.9 in May and June US PCE which is expected to increase by .2% m/m from .1% in May. We have also June US durable goods orders which are expected to increase by the same rate of May by .8%.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Mon, Aug 4 2008, 09:11 GMT