The greenback could harvest the inherited gloomy growth outlook picture in EU and UK from US. The market is waiting this week for EU PMI manufacturing and service data and there is expectation of a close reversing above 50 yet. The IFO data has shown that the germane business climate is struggling. This mistrust sentiment of the single currency is negative for the EURUSD which faced a strong resistance to stand back above 1.575 again forming another lower high at 1.575 after
1.5935 and 1.6023.Also today's new low records of the UK mortgage approvals at 36k plus the -36 of the UK retail sales CBI could give enough pressure on the cable to sink below 1.991 with no expectation of a new MPC split decision as the serious needs of consuming currently or even if there is a vote for hiking in the face of inflation, it is hard to have a majority to hike interest rate amid the current decline of the commodity and oil prices which trading for the second week below 130$ a barrel.
From another side the greenback and the US stock market could capitalize the decline of the commodities and oil prices recently making rally after yesterday Merrill lynch write down bad news. It is right that the housing sector outlook is still blur but the equity market has managed to gain trust from this decline of oil prices and the US financial quarterly earning reports which have given the market the sentiment that the credit crisis is easing and there can be no worse than what has been done because of the housing market slump after last summer US sub-prime mortgages bad loans problems which dragged the home prices down and caused worries about growth and an ease of the interest rate to 2% from 5.25%. in spite of the recent Minneapolis Fed President Stern saying that the worst has yet to pass and the credit crunch impact can continue into next year.
Best wishes
FX Consultant Walid Salah El Din E-Mail: snipped-for-privacy@fx-recommends.com