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20/9/2010 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Sep 19, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The worries about the Irish debt outlook could contain the market sentiment by the end of last week before the IMF and Ireland’s Department of Finance come out denying the need for the IMF support after an article in The Irish Independent newspaper based on an evaluation from Barclays suggesting a serious need of the IMF support, if the debt situation of the European countries exacerbated further causing further loses of their banking sectors. The single currency has been supported last week by the EU Commission revising up of the European growth rate this year to 1.7% in 2010 thanks to the weak euro and the germane driving growth pace which has been revised up to 3.4% from 1.2% getting over last week worries about the recent European Stress tests results which could contain the market sentiment driving the European yielding curve up bringing back the doubts about the debt crisis future after wall street Journal report highlighted the exposure position of the European major banks to the governmental debts and from another side by the lighter than expected Basel 3 banking deal arguments for capping the exposure of the banks to the markets risks holding just 7% of their common equity money instead of 9.5% as what was expected delaying the working of this it to Jan 2019 which is very enough time to the banks which have seen in these new regulations cooling down of their the profits and tightening of their roles in the benefits of the borrowers for supporting the economy and keeping its roles on just lending conservatively with minimal possibility of taking risks directly and in the same time, capping of the available liquid amounts for lending to not be exposed again to a credit crisis as surely the cost of failing of a borrower is not the same as failing of a bank!. The single currency has reached 1.316 before closing the week at 1.3045 keeping its gains above 1.3 psychological level versus the greenback which has been supported by some selling pressure in the equities markets on the continued weak consuming data from US which have come this time from the slump of September University of Michigan consumer sentiment preliminary to 66.6 in from 68.9 in August increasing the profit taking and the risk aversion pressure to close the week at 1.3045 keeping its gains above 1.3 psychological level.
    The cable has been dragged down too from 1.571 to close at just 1.563 carrying the market doubts about the debt situation of UK which needs to be much more credible as what has been mentioned from King last week in front of the trade unions last week and the weak retail sales of august which plunged monthly by .5% while the market was waiting for increasing by .3% from .8% in July and the dovish UK labor report release which referred to 2.30k rising of the jobless claimant in August and in the same time, increasing of the Consumers Price Index of August to 3.1% y/y with the core rising to 2.8% from 2.6% capping BOE from taking further easing steps can push these rates up.
    After USDJPY 83 level had been defended by the BOJ by 2 trillion yens as what is widely estimated last Wednesday, it is trading now above .85 with no edging lower than this level till the weekend as the Japanese intervention after 6 years of silence has really sparked the traders fearing of taking further long Japanese yen listening to the aggressive talking language out of Japan which continued till the week end by the Japanese Finance Minster's Noda repeating the readiness of taking further steps against the forex excessive rising which does not reflect the market fundamental. We have mentioned recently that The Japanese yen is well-exposed to the BOJ interventions threats as it is hard to give up to the demands for watching its currency appreciation after unexpected growing of the Japanese Q2 GDP by just .1% while it was waited to be to be .6% and amid increased probability of having further persisting deflation forces because of the suffering consuming pace in US which has not reached its end as it looks yet in a time of cooling growth tries in China which has increased worrying about prices currently as we have seen it in the beginning of this month calling for banking stress test suggesting declining of the housing prices by 60% which is the double of what was initially made at just 30% and it has obeyed for demand for further re-evaluation step used to be named gradual action by PBOC after it has actually reduced the banks lending percentage to their capitals from the beginning of this year which worked too for the demands of cooling this overheating economy which caused prices rising risks could be appreciated finally by PBOC which can effect negatively on its demand for capitals goods from Japan and we have seen the Chinese PMI index coming down in July to just 51.2 while the Euro zone as a counterpart competitor of Japan is getting use of the EUR which has fallen trading well below 110 the Japanese yen and this can continue, if BOJ let the yen to appreciate trading freely below 85 psychological level.

    Best wishes

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

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