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16/12/2010 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Dec 16, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    As expected and as what has been mentioned in yesterday report, Irish voting came very close by 81 for approving against 75 for opposing the bailing out package to be passed hardly despite the strong opposition which mostly see that the 5.8% interest rate average of this 85b euros loan should be lower looking for its banking system to be reliable to carry the debt risks it had but this has not help the single currency which has been hit again by downgrading threats of the Spanish debt rating of Aa1 by Moody's to accumulate more pressure on the single currency versus the greenback which is still supported by the Fed decision of keeping its purchasing assets plan unchanged changing the pace of it as the economy needs referring to the weak growing pace which can not support the labor or give stability to the housing market sufficiently as required which can underpin the downward of prices from another side which can help the Fed to keep the interest rate unchanged building on its quantitive easing policy to support the economic growth unfazed of the potential inflation risks but Mr. Hoening the Fed's governor of Kansas who voted against this decision appreciating these inflation upside risks over the long term but on the short term we are still watching a sluggish growth of the prices and deflation risks as we have seen US CPI of November coming at .1% monthly while it was expected to be .2% and the core figure excluding the food and energy could rise by .1% as expected after 2 months of flat reading maintaining the fed's view and monetary policy which have caused rising of the prices of the energy and commodities depreciating the greenback forcing countries like Sweden which raised the interest rate by .25% this week for curbing the investment spending and cooling the economy and as we see also in Korea and China which increased its banks reserve requirements six times this year by 0.5 percent for curbing the inflation upside risks as the most preferred way to the Chinese until now than hiking the interest rate or letting the Yuan to appreciate further criticizing this US quantitive easing policy of US which is causing a devaluation of the greenback hurting their economic growth and their exports and in the same time helping to tightening the US trade deficit which came down in October to 38.7b$ from 44.6b$ in September while the market was waiting for 44.8b$ and as long as the US labor market is still in need of supporting, there will be no clear end of this easing policy and tax cuts in US which can be kept longer this week since declaring them during Bush's presidency in another way of easing can hurt the US budget and treasuries prices driving the US treasury yields up as we have seen by the end of last week and after the Fed's decision which triggered selling of the treasuries and rising of its yields driving up the cost of borrowing in US despite the Fed's injected funds into the debt market which should lower returns but the market is still expecting further easing steps from the Fed and longer period of keeping the tax cuts in US which can widen the US budget deficit hiking the treasuries yields increasing the need of selling these held treasuries notes while the greenback seems getting benefits from the rising of the notes benchmarks and that was obvious to the market after the Fed had announced that it will not buy more than what has been planed which can support this link currently adding strength to the greenback which dragged the single currency down to be traded below 1.325 currently and By God's Will, if this convincing story could contain the market sentiment further, it can test its recent formed intermediate bottom at 1.317 and breaking it should lead to 1.306 and then the recent supporting level at 1.297 whereas the pair has met new buying interest recently and breaking it can lead to 1.26 as the main bottom of its previous ascending rally which has ended at 1.4281 versus the greenback.
    God willing, we are waiting today from US for the initial jobless claim to 11 December be 425k from 421k from a weak earlier when it has cheered the markets sentiment by 421k and also November US building permits which are expected to rise by .57m from .55m and housing starts to rise by .55m from 52.m and December Philadelphia Fed Manufacturing Survey to be 14.1 from 22.5 after NY empire state manufacturing index coming up to 10.6 while it was forecasted to be 3 from -11.1
    Best wishes

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

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