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28/4/2010 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Apr 28, 2010.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The market is curiously waiting for the Fed's interest rate decision today looking for 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. We have seen recently improving in the US labor market and strong earning reports of the Q1 from US in the recent 2 weeks pushing its equities market up helping Dow to reach a New Year high above 11.200 but yesterday new downgrading of the Greece debt by S&P too weighed negatively on the investors' risk appetite as the market has seen in this new downgrading that the worst can still be ahead of us not behind of us with just a release of joint European rescue plan worth 30B euros on an interest rate below 5% along side the IMF more than 2 weeks ago with no even activation time of it until now. the investors are in need to have an end of this to buy again not waiting to see the results of the germane parliament voting on the Greece rescue plan and the leaders meeting for supporting Greece politically worrying about the Greek ability to finance its current debt costs in the normal crediting market in the months ahead.
    The US stocks have slumped with the market focusing on the debt crisis in Europe and the investors have lost a lot of their trust in taking risk at the current rates pushing the greenback up across the broad and the gold as a better safe haven option with the current global missing trust in the bonds attractiveness and increased worries about its rewarding as a fixed income option of the investors who are looking for a saving option and that's rather than the increasing of the commodities and energy prices which are still pushed up by the current low accommodative levels of interest rate across the broad which is lowering the cost of borrowing from a side and the value of the currency from another side. The gold has got above 1170$ for a while yesterday before trading just below it and the next resistance is expected to be at 1200$ psychological level and then its recorded high on the third of December 2009 at 1226$.

    God willing, if we are to have a sign that there is a sooner than later tightening action by the fed, if there is no actual action today, the greenback can have a strong support versus the single currency which can weigh on it to break below 1.3 but if we had the same statement of keeping the interest rate at an exceptional low level worrying about the solidarity of the recovery in US and the credit crisis of Europe impact, this can delay it to a later time this year!

    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 was not capable to get 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 but yesterday new S&P downgrading could really contain the market sentiment by the fed's meeting today in spite of yesterday strong US Consuming confidence which has risen in April to 57.9 and the market was waiting for just 54.2 from 52.5 last March. .

    As I have mentioned after the release of the net borrowing data of the public sector of January that the case in UK is not much better than it in Greece and the debt is in building up stance
    which is facing a higher inflation outlook as the BOE has ensured again recently in its last meeting minutes release 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 while the other European countries could not have a solid growth out of the recession too with an increased demand to store confidence right now with the market focusing on the costs of their 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.

    God willing, it is important this week to wait too from US for the 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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