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3/1/2011 - The current market sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Jan 3, 2011.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The commodities currencies are still underpinned by the market expectations of demand rising in the New Year with the US adopted easing policies which are not expected to be end soon supported by the Chinese decision of lowering its exports of the rare metals. The Canadian dollar has reached parity with the greenback while the Aussi is trading above 1.02 currently. The demand for oil also is widely expected to rise from another side because of the bad cold weather in US, Europe and even in China which watched degrees below -30 this year. The oil has ended the last year also well supported by shortage of the US inventories of the crude by another 2.3m barrels after 5.3m barrels a week earlier while they were forecasted to be just 1.5m barrels of declining which is still giving a potential high outlook of the prices in the new year which is looking having better economic outlook to the investors after last Thursday up beating data which have shown rising of US December Chicago PMI to 68.6 while it was waited to be 61.5 from 62.5 in November which show that we can have stronger than expected US ISM manufacturing index today which was waited to be 57.3 from 56.6 in November and also we have seen last week weekly jobless claim coming at 388k while the market was expecting 412k which show that there can be improving of US labor report data which are expected to come by the end of this week showing that there is a rising of the US non-farm payroll of December by 135k after adding just 39k in November. The market have seen in these data new chance for pushing the energy and commodities further making the copper close to its all times high while the silver is trading well above 30$ and the gold to close last year trading over 1400$ per once supported by the increased inflation outlook from the rising of these commodities and energy prices.
    The Single currency could add to its gains by these data which can help the growth outlook of EU too creeping above 1.33 versus the greenback but the market sentiment seems unchanged toward the single currency which suffering from the debt crisis while the European equities markets are expected to open up after the Chinese strong gains with materialized improving of the risk appetite currently underpinned generally by high potential of the commodities and energy prices which can reinforce the mining and the oil companies earning with the ECB keeping of its supporting of the bonds markets lowering the yields giving underpinning the investors' confidence of the investors with the market focusing on the debt crisis but these gains can be always tempered by be the threats of the debt contagion worries putting the European stocks back under pressure and the single currency which has a weaker positions with the market expectations of pumping new funds into countries actually suffering from weak financial position and accumulated deficit like Greece which could have an extension of its loans maturity and also Spain and Portugal which has been downgraded by Fitch one notch to A+ with a negative outlook which can keep it under pressure to be the nearest to take a share from the IMF and the EU bailing out package 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 recently which contained the market sentiment weighing negatively on the Euro ignoring the better than expected economic data from Germany which driving the EU economic growth up as we have seen recently the germane IFO business climate recording new historical new high in December at 109.9 since the beginning of it in 1991 after it has made 109.3 in November and the germane retails sales figure of October rising up by 2.3% monthly while it was expected to be up by just 1.3% after falling in September by 1.8% which helped EU consumer confidence getting up to new 3 years high and it can lead December EU manufacturing PMI index which we are waiting today by god's will to be 56.9 from 55.3 in November after 55.5 in October. The single currency is facing now again the resisting area from 1.3385 to 1.3425 which can be followed by 1.35 psychological level which failed recently to get over it after bouncing from 1.297 which could be protected by finding support last week at 1.305 heading up.
    The Chinese stocks market has had a very strong session driving shanghai index up by more than 300 points until now cheered by the US better growth outlook which is containing the market sentiment currently after there recent data while the Japanese market is still off because of the holidays. The Asian equities markets were negatively impacted last week by the Chinese decision of raising interest rate .25% but the markets have started to get over this decision supported by increasing of November Japanese industrial productions which rose up monthly by 1% to be the first time in the recent six months shrugging off China's monetary tightening pace which has become concluded pricing in the markets. The Chinese decision was the second in the recent 3 months after it had requested from its banks to increase their reserve requirements 0.5 percent to be the sixth time this year for curbing the inflation upside risks by capping investment spending cooling the economy with rising of the energy and commodities prices by this year end which is expected to continue with the Fad's keeping of its quantitive easing policies which caused depreciation of the greenback putting China under pressure to cool its economy further which can have a negative impact on their economic growth and exports at the current high prices and also their stocks markets which have lost above 500 points since the middle of last month under the pressure of this policy which can support the Yuan hurting the business spending and this has really helped US trade balance to get better 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 this is expected to continue while US is still having an unstable housing market growth yet and weak labor market which can support the Fed keep its monetary policy stance unchanged unfazed of the inflation risks which are still looking tame as we have seen recently US CPI of November coming at .1% monthly while it was expected to be .2% and the core figure excluding the food and energy rising by just .1% as expected after 2 months of flat reading maintaining the Fed's worries about the deflation risks while Chinese inflation came at a 28-month high at 5.1% in November which can open the door for PBOC to take tighter monetary actions for staving off the prices currently which can hurt the global growth rates and effect negatively on the risks appetite supporting the greenback and the gold as a reaction of the US easing policy which has hurt the greenback again by extending the working of the tax cuts which have been taken during Bush's presidency with increased demand for cutting the corporate taxes too following Japan as it has become the highest industrial country holding of these taxes in another easing expected step can hurt the US budget driving down the treasuries while china has a great deal of them in the same time.

    Best Wishes for a Happy New Year

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

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