29/6/2009 - The Current Market Sentiment

Last Friday release of June US consuming sentiment has shown a continued improving of the consuming apetite the final number of June came at 70.8 and it was 68.7 in May and US personal income which has
come strongly better than the market forecasts of just .4% at 1.4% in May but These figures have not made a considerable change of the greenback current tight ranges of trading. Dow has lost 34 points in its last session to close at 8438 with no major change of its opening. The Fed's come out last week with a new US assessment downplaying the deflation risks with no new added easing steps of its quattitive easing policy. The fed has not mentioned the deflation risks as it has done it its April meeting and the concerns about the US treasuries attractivness amid rising of the comodities and energy prices seemed caping the Fed as By god's will, if these huge Fed's quatitive easing steps could cause the inflation preasure which can hurt the demand for the US treasuries, this can lead to a hike of the interest rate and tackling of further easing steps of the current quantitive easing policy of the fed to add some attractivness to the US treasuries to convince the bonds holders to keep their holding of US debits to prevent a second round effect of the credit crisis by the this current waited halting recovery. The US treasuries notes were the first option of the Fed's quantitive easing policy by offering an exchange of them by the mortgages back securities which caused the financial problem and became known as toxic assets which can poison the US creditability itself and they are still the Fed's preferred way to pump funds and easing by its adopted quantitive easing policy after losing the cutting interest rate tool to afford the required liquidity for the government to clean the banks balances sheets and to spur growth moving in its rescue financial plans for a promising recovery can start later this year and store the confidence in the US economy again to cover its debits worries. So, by god's will, it is important this week to watch the pace of the US manufacturing recovery and the current recession impact on the US labor market in May. We wait the US manufacturing index of June to be 44 from 42.8 in May and also the US non-farm payroll to lose more 368k jobs in June and the US unemployment rate to increase to 9.6%. If we had weaker performances of these important indicators, the market expectations of a halting unreliable recovery can increase weighing negatively on the equities market and the risk appetite which can support the greenback. The single currency came under the same pressure versus the greenback to slide from above 1.41 to stand above 1.39 currently. We have seen the beginning of this week the germane IFO of June which was expected to be 85 coming at 85.9 after last week release Germane ZEW of June which surged to 44.8 from 35 in May while the current conditions figure improved to -89 from -93 in May and we have seen also the flash reading of June PMI manufacturing index which was expected to get better to 40 from 39.6 coming at 40.5 and PMI services index of this same month which was expected to be 45.6 from 45.2 in May coming at 44.5 but these data could not make a major change of the single currency direction last week waiting god willing for this week final releases of EU Manufacturing PMI index which is expected to improve to 42.4 from 40.7 in May and EU PMI Services index of June which is expected to be 44.5 from 44.8 in May. Also it is important this week to wait for the release of EU CPI preliminary release of June which was unchanged in May y/y and the ECB president Mr. Trichet has indicated in his recent press conference after the ECB decision to keep the interest rate unchanged at 1% on the 4th of this month that the ECB is expecting the inflation to be from 0.1% to 0.5% and if we have had negative rates this week this can dampen the single currency. We wait also to see the ECB interest rate decision which is widely expected to be unchanged at 1% and Trichet press conference to know its recent evaluation after its decision last week to extend its lending offering to the European countries to 442Bln Euros for one year in another extra easing decision in which can move current economic recession. The gold is still under the pressure of the commodities and energy prices easing and the correction of the stocks market in the recent 2 weeks which downplayed the inflation upside risks. From another side, the recent US inflation data show that the inflation pressure is still tamed negatively impacted by the recessionary as May US CPI Index decreased by 1.3% y/y broadly and the core figure excluding the food and energy decreasing to 1.8% y/y could add pressure on the gold which is the mirror of the inflation as the market was waiting for a slide by just .9% after April slide by .7% broadly and was waiting for the core to be as the same as April at 1.9% and also May PCE came broadly yearly at just .1% from .4% in April and the core came at 1.8% and monthly the figure came broadly as the same as April at just .1% while the core came lower than the market forecast of .2% and lower than the .3% of April at just .1%. The gold came under strong pressure after sliding from 960 to be under further technical pressure to drove it down below 942.8$ to reach a new low at 912.8 after its previous low at 925.88 before rebounding to 948 but it could not close above 940 again. Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com http://www.fx-recommends.com
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