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11/1/2011 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Jan 10, 2011.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The market sentiment has been contained in the beginning of this week by rumors about European pressure on Portugal to join the bailing out package following Ireland. The single currency has opened the week down below 1.29 versus the greenback before retracing some of its recent loses but it is still trading below its previous support level at 1.297 which is still worrying the buyers of this pair as confirming it as a resistance can open the way for falling to the next major supporting level at 1.2585 with the market focusing on higher yielding bonds issuance from Portugal and Spain, in spite of the ECB funding which can increase the market worries about the debt contagion inside the Euro zone by god's will even though the recent good performance of the European stock following the growth recovery optimism in US and better economic data like December EU PMI manufacturing index which rose above US to 57.1 and the recent continuous improving of the market risk appetite which came by the greenback side this time as the market is still worried about the debt contagion inside the Euro zone gloomy by the Estonia recent adoption at this time focusing on the downgrading probabilities of the credit rating of the Euro zone ailing countries of debt which have fallen previously on these countries with negative outlook of their debts as we have seen recently Portugal which has been downgraded by Fitch one notch to A+ with a negative outlook following Ireland which has been downgraded five notches to Baa1 with a negative outlook from Aa2 by Moody's which has announced that it can downgrade the Spanish long term credit rating of Aa1 too.
    While The Greenback is still looking well supported by rising of its bonds yields which have started to trigger the treasury and the Fed worries recently as the economy seems in better shape now and there is a limited probability of adding new funds from the Fed with the current improving of the economic data while the budget deficit is still going larger and the call of raising the taxes are increasing even from the former Fed's Chairman Mr. Alan Greenspan.
    The confidence in the greenback could gain momentum recently by better than expected data reflect bullish economic growth outlook in US and better demand for the US dollar borrowing underpinning the US bonds yields helping the equities markets and the business spending driving the gold prices down as we have seen previously despite the lower than expected the non-farm payrolls which have just added 103k while the market was waiting for 135k in December, the unemployment has fallen significantly to 9.4% from 9.8% in November and the private sector has added 113k after December ADP Employment release which came at nearly triple of the market expectations of just 100k at 297k added jobs from 93k in November and Nov US factory orders data which have shown rising by .7% while the market was waiting for decreasing by .4% after falling in October by .7% and also both of US December manufacturing index and non-manufacturing index getting better to 57 and 57.1 consecutively after US December Chicago PMI had come at 68.6 while it was waited to be 61.5 from 62.5 in November which are the best since the ending of the credit crisis as the market sees now that the US economy is much more credible driving the greenback up across the broad even versus the commodities and the energy which fuel this better growth outlook asking for the greenback weighing negatively on the Aussi which came back to parity with the US dollar driving the gold down with better business sentiment getting out the money from the safe haven stance pushing it to test its next supporting level at 1360$ which can be followed by 1329$ and 1315$ with investors rising confidence in the greenback which has been boosted from another side this week by the announcement of the Fed's recent meeting minutes which have shown easing of the Fed's fear about deflation and appreciation of the yield rising with rising confidence in the US recovery which can increase the borrowing and the prices too easing back the growth downward pressure which helped the greenback to get off its low at .93 versus the Swiss Franc which always takes use of the market tendency for taking a safe haven stance too with the worries about growth.
    The British pound could add more gains reaching 1.56 after the lower than expected figure of non-farm payroll of December has hit the greenback by the end of last week to help the cable to have a floor at 1.54 after falling under pressure because of Q4 2010 mortgage defaults value which rose for the first time since Q2 2009 and the sudden slump of December services PMI below 50 at 49.7 in the contracting territory to temper the positive sentiment towards the UK economy and the British pound which has been triggered by December manufacturing PMI rising to 58.3 while the market was waiting for the same reading of November at 57.5 which brought back some confidence in the UK economy reducing some of the market discounting of adding more funds to its buying bonds plan getting off some of the pressure on the British.
    God Willing, the market will be waiting this week for November US trade balance to be -40.6b $ after we had seen significant tightening of the trade deficit in October reaching 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ on the current US easing policy which weakened the USD lowering the costs of exporting and the imports specially from china which is worrying about the inflation outlook taking a tightening monetary stance by raising interest rate .25% twice in less than 3 months requesting from its banks to increase their reserve requirements 6 times last year for curbing this inflation upside risks which was at a 28-month high at 5.1% in November while it is still looking benign in US as we have seen November US CPI coming at .1% monthly while it was foreseen to be .2% and the core figure excluding the food and energy rising by just .1% as expected after 2 months of flat reading and we wait by the end of this week for December CPI figures which are expected to show rising of the broad rate by .4% while the core excluding the food and energy is expected to be up by .1% again and we also wait next Friday for January preliminary reading of University of Michigan monthly consumer sentiment index to be 75.5 after getting up to 74.2 in mid December from 71.6 at the end of November while it was forecasted to be 73.
    Kind Regards

    FX Consultant
    Walid Salah El Din
    E-Mail: mail@fx-recommends.com

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