JP Morgan offer to buy Bear Stearns added to the market credit crises worries expecting that the worse has not come yet and there can be further write downs. We watch actual turmoil in the markets and a great deal of uncertainty to push the gold higher further. The fed cut the discount rate to 3.25% by another .25% and we wait further dovish statements after the interest rate decision this week. The current expectations reached cutting by 1% to stimulate growth and bring funds to the tackled financial markets. Cutting by this massive way can add further woes to the weak dollar across the broad. The market has started this pricing after a weaker than expected inflation pressure in Fed as it has came broadly unchanged and the core also came unchanged and the market was expecting 0.2% increase for the Core CPI and a 0.3% rise for the broad figure. The markets have seen the data as a green light to the fed to cut further safely with a lower than expected degree of upside inflation risks. It has become obvious that the demand slow down affecting negatively in the prices. It is a clear recession sign. The greenback is not expected to find a support by this week strongly awaited Fed's meeting.
The single currency got benefits from the recent up beating series of data as Feb ZEW figure which came just -32 and EU industrial productions which surged in Jan m/m by .9% and the market was just expecting .3% these data came after better than expected IFO figure reached 104.2 last month showing an actual improvement in the germane economy and optimism that the growth will be as potential as what was expected in spite of the crediting crisis. The ECB Members' comments are still hawkish towards inflation which can add to the interest rate outlook of the single currency eliminating any market expectations of a rate cut soon. But there is still concern that the recent Single currency appreciation can be considered as a an excessive volatility as Trichet has indicated clearly his concern of this pace of appreciating and his eye on the forex market and he has mentioned the US sticking to its US strong policy which could cap the single currency and that's was by reaching 1.59 with the beginning of this week!
Surely, the Japanese yen could gain on the unwinding of carry trade and this strong wave of mistrust of taking risk but it is strongly subjected to actual interventions as these new rates versus the greenback in the Asian session which reached 95.73 by correcting above
96.00 again. The Japanese yen has repeated its decline for the third consecutive week beginning as a spreading out risk aversion sentiment in the equity markets.By God's Will, We have today US Current account Q4 data and Mar NY Empire State Manufacturing Index.
Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com