As what has been aforementioned in the recent analysis, the closes of last week could increase the optimism momentum sentiment pushing the equity market higher in the opening of this week putting more weights on the USD and the Japanese yen on increased risk apatite wave could steep the gold loses below 900$. Nikkei 225 is trading up right now by 200 points and European equity markets are expected to open up too.
Last week release of the disappointing March US non-farm payroll was widely expected specially after the release of US ADP employment of the same month which came at -742k referring to a continuation of the massive pace of contraction in US and further declining of the consuming spending to come. The US has lost another 633k jobs in March out of the farming sector pushing the employment in US to 8.5% but the equity market could close in the green territory in a mixed session. The Dow which could close above 8000 up by .5% has begun the week with a smooth correction after 3 weeks of gains but it could over come this correction closing above this psychological level optimistic by the performance of the G7 meeting corporation and results in London which weighed on the price of gold to close below 900$ and the elevated the prices of the oil on increasing hopes of the recovery elevated the risk appetite pushing the USDJPY to close first time above 100 for the first time since 21 October 2008.
The cable could get over its previous resistance at 1.4777 closing above 1.48 amid the disappointing jobs data of US and better than expected PMI service figure of March has reached to 45.5 after the earlier release of PMI manufacturing index of UK which could give a support to the British pound across the broad this week. The index came at 39.1 in March and it was expected to be 35. These figures show a smoothing of the recession pressure on UK in March. The cable is now trading well below 1.50 after the breaking out of 1.477 by the end of the last week ahead of this week MPC meeting which is expected to make no change in the current interest rate after the recent cut to .5%.
The single currency was well bought in the beginning of this week and after the ECB decision to cut by just .25% last Thursday. The single currency could open above 1.35 versus the greenback. Trichet's comments have been read as a smoothing of the market to quantitive easing steps in EU by the ECB following US. Trichet said that further nonstandard measures may be taken in May when the central bank meets to set interest rates. Other major counterparts from the Federal Reserve to Bank of England have tapped the so-called quantitative easing measures this year but he has tried to indicate the upside inflation risks which can result from the quantitive easing policy in the press conference adding that technical and legal reasons that make it complicated for the central bank to buy governmental bonds and also Mr. Papa demos the vise president of the ECB said the central bank had made no decision concerning the need for these measures or the nature of these measures and these comments were not meant to prepare the market.
Anyway the single currency has found support from the lower than expected cut by .25% as the conservative measured way of cutting interest rate in EU to stimulate growth in the face of the recessionary pressures keeping the medium term inflation well-anchored. We wait later today for the release of EU retail sales of February which is expected to decline by 2.5% y/y and .3% monthly.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
