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27/4/2010 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Apr 27, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The debt problems in EU and UK are still containing the market sentiment weighing negatively on the investors' risk appetite again pushing the greenback up today again with continued worries about the launch of the EU and IMF rescue plans for Greece. The single currency has been supported after the release of this 30b euros European rescue plan for Greece more than 2 weeks ago which could calm down the market but it has failed even to break above 1.37 versus the greenback to fall again below 1.325 last week after the downgrading of the Greek bond rating from A2 to A3 by Moody's which put the Greek prime one short term issuance under the review of downgrading too weighing negatively on it across the broad pushing it down versus the greenback below 1.325 before getting back up with the US equities market ability to keep its gains by the end of last week pushing the greenback down after the market worries about the Goldman sacks fraud have been put aside with the outstanding quarterly earning reports from Citigroup, Goldman sacks and apple thanks to its Iphone sales which could really contain the market sentiment encouraging the investors' risk appetite again.

    As I have mentioned after the release of the net borrowing data of the public sector of January that the debt is in building up stance in UK too while the European efforts are emerging for staving it off in Greece and inside the euro area with their current struggling growth rates comparing with US which can underpin the greenback this year with the market focusing on the costs of these debts while the European governments are still forced to keep its spending up and the taxes down for spurring the investment and moving the struggling economy out of the recession avoiding a double dip recession because of the credit crisis which is weighing negatively on the single currency as the market is still in need to get that the worst of this debt crisis has become behind of us and not still ahead of us to push up the single currency again which is not materialized yet to the market amid the current very slower pace of growth in the euro area comparing with US after the credit crisis negative impact on the EU economies which pushed the governmental spending up for spurring investment and growth on the account of their budget deficits which are threating the market confidence and the recovery itself right now with market focusing this year on the consequences of these debts and their costs.
    From another side, The recent weak borrowing data from UK which has recorded its highest level since recording beginning 63 years ago with a very wider than expected deficit of the Public sector net borrowing has reached 23.5b Stg in March could underpin the conservative lead last week before the elections on the 6th of next month by god's will which could give an excuse to the British pound from falling in a rapid way like what it has done in Feb when the situation was mixed between the conservatives party and the labor party when the cable slumped to 1.4782 after the release of January public sector net borrowing data which posted its first net borrowing deficit month since the beginning of 1993 reaching 4.3b Stg while the market was waiting for covering 2.8B Stg which can keep pushing its budget deficit ratio to GDP above 12% like Greece otherwise it looks in building up in UK which is facing a higher inflation outlook as the BOE has ensured again recently in its last meeting minutes release last week after their unanimously decision to keep the BOE buying bonds plan unchanged at 200b Stg unchanged again which can erode the impact of its QE policy putting pressure on the British pound to fall again versus the greenback to fall again below 1.5 which can be kept further as the UK is still struggling with Q4 GDP 2009 revising up to just .3% from .1% in the first reading after being the only western European economy in recession in the Q3 at -.1% quarterly.

    God willing, it is important this week to wait from US for the fed's interest rate decision and its US assessment tomorrow to know if there is a new upgrading of their assessment of the US economic performance and especially the labor market which can add to the market confidence which is in need now to have a removal or even a change of their mantra of leaving the interest rates at exceptionally low levels for an extended period of time and also to know if there is another opposing voting to favor an interest rate hiking beside Hoening or not and by the end of the week for US Q1 advanced reading which is expected to be up by 3.4% from 5.6% in the fourth quarter of the last year and US Chicago PMI of April to be 60 from 58.8 in march.

    Best wishes

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

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