16/4/2008 - the current market sentiment

The greenback is under pressure this morning ahead of the release of US MAR CPI which is expected to come to .2% broadly and 4% yearly and the core to be  .2% from no change last month and 2.4% yearly. The current record highs of the oil rates is containing the current market sentiment putting  pressure again on the greenback ahead of this week EIA crude oil stocks changes after the recent decline of US stockpiles last week by 3.2 m barrels from a rise of more than 7m barrels a week earlier. So, the market will pay much attention to the oil weekly inventories data today as the pervious data weighed strongly on the greenback across the broad driving gold rate back again above 930$. The greenback is exposed to further decline versus the gold on this continued decline of inventories ahead of the driving seasons. So, the market will pay much attention to the gasoline figures.

The single currency was under pressure yesterday on weaker than expected economic sentiment ZEW of April which declined to -40.7 and it could not surpass the 1.5914 on Mersch's comments which showed that the interest rate will be held at 4.0% till the end of the year on the current inflation outlook for keeping prices will anchored. The pair found repeated resistance at this level and a clear break of it can trigger further massive selling of the greenback.

The British pound is still under the pressure of the weaker than expected decline of UK like of like retail sales of March which declined by 1.6%. The British pounded recently was very exposed to the US economy weak performance and negatively impacted by the slump of US housing data and crediting problems. The market is not cheered enough to buy GBP currently as they do with the single currency which is looking unfazed with US comparing with UK leading EURGBP to a new all times high at.8061 yesterday . There is a growing expectation currently that UK can fall in mild recession as US and there is further expectations of cutting interest rate and UK Mar CPI came encouraging this prospect as it has fallen to just .4% m/m versus market expectation of .6%. We wait today for UK labor report which is expected to show a decline of the claimant in March to 1.0k after Feb decline by 2.8k and the unemployment is expected to be unchanged at 5.2% in Feb.

We wait also for US Mar industrial production which is expected to be negative again but just by .1% from -.5% and the capacity utilization to be at 80.3% from 80.4%. Also US housing permits and March housing starts will be closely watched as the US housing market is still containing the market sentiment as the main reasons of the expected recession. The first is expected to be 980k from 984k in Feb and the second is expected to decline to 1.02m from 1.065m in Feb.  

Walid Salah El Din

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