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1/7/2009 − The Current Market Sentiment

Wed, Jul 1 2009, 12:17 GMT
by Walid Salah El Din

FX Recommends

The Greenback is still holding its gains across the broad after the disappointing release of June US consumers confidence survey could contain the market sentiment effecting negatively on the risk appetite. The figure came at just 49.3 and it was expected to get better to 57 after May jump to 54.9 from 44 in April which fueled the market optimism in the beginning of June but the collapse of June. Dow closed at 8447 losing 82 points after gaining in its first session this week by 1.08% after 2 consecutive weeks of losing after reaching this year high at 8875 on 11st of last month from the index low on 9th of last March when it reached 6469. By god's will, the market is expected to focus today on the release of US manufacturing index of June which is expected to be 44 from 42.8 in May. It is also important to watch the current recession impact on the US labor market in May when we have tomorrow the release of June US non-farm payroll which is expected to lose further 368k jobs and the US unemployment rate to increase to 9.6%. If we had further weaker performances of these important indicators, the market expectations of a halting unreliable recovery can increase weighing negatively on the equities market and the risk appetite adding further gains to the greenback.

The British pound is still under the pressure of UK GDP Q1 final reading which was expected to decline quarterly by 2.1% and yearly by 4.3% and it has come at -2.4% q/q and -4.9% y/y. The cable could reach a new year high by the release of the data at 1.6743 before falling below 1.64 with the disappointing release of June US consumers confidence survey. The release of June UK CIPS manufacturing index which came at 47 and it was expected to be 46.6 from 45.5 in May has not make a major change of the cable which started the day hovering above 1.64.

The single currency has suffered too versus and it is still unable to stand above 1.41 in spite of the optimistic consuming confidence figure of June which came at -25 from 28 in May giving some support to the single currency as it was expected to get worse to -30 which helped the European stocks in the beginning of this week. The single currency was little changed today after the release of EU Manufacturing PMI of June was expected to improve to 42.4 from 40.7 in May and it has come at 42.6 as the main market focusing is expected to be on tomorrow ECB interest rate decision meeting and the Trichet's press conference after it after its decision last week to extend its lending offering to the European countries to 442Bln Euros for one year in another extra easing decision to help the struggling European economy.

The gold is still struggling to stand above 940$. The gold has suffered recently from the easing of oil and commodities prices and the correction of the stocks market in the recent 2 weeks which pushed underpinned the greenback and downplayed the inflation upside risks which came tamed negatively impacted by the recessionary pressure in May. The market is expected to look at the price paid index of the US ISM manufacturing index which is expected to increase to 46.7 from 43.5 today to know the prices pressure developing in this sector after we have seen US CPI Index decreased by 1.3% y/y broadly and the core figure excluding the food and energy decreasing to 1.8% y/y could add pressure on the gold which is the mirror of the inflation as the market was waiting for a slide by just .9% after April slide by .7% broadly and was waiting for the core to be as the same as April at 1.9% and also May PCE came broadly yearly at just .1% from .4% in April and the core came at 1.8% and monthly the figure came broadly as the same as April at just .1% while the core came lower than the market forecast of .2% and lower than the .3% of April at just .1%. The gold came under strong pressure after sliding from 960 to be under further technical pressure to drove it down below 942.8$ to reach a new low at 912.8 after its previous low at 925.88 before rebounding to 948 but it could not even close above 940 which has been taken out hardly today. The gold should face a difficulty again to get above 948 to retest 960 as a resistance.

Best wishes

FX Consultant

Walid Salah El Din

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

Published on  Wed, Jul 1 2009, 12:18 GMT