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Posted by fxrecommends@gmail.com on March 31, 2008, 3:21 am
It is still the same sentiment which impacted negatively on the
greenback as the interest rate outlook which is looking going wider in
spite of the Fed's cuts after the sub-prime mortgage crediting
problems beginning for spurring growth, investments, liquidity easing
the credit crunch.
There is still a great deal of uncertainty in the equity market making
the demand for Japanese yen as a carry trade funding currency very
volatile recently reflecting this uncertain volatile movements of the
stock markets especially the US one as the leader of it and the leader
of the credit problems!. After the final reading of the Q4 GDP came
unrevised at .6% and the price deflator of it revised down to 2.5%
showing lower than expected inflation pressure which can be resulted
from a slowing of consuming in that quarter.
March University of Michigan Consumer Sentiment came at 69.5 which is
just lower than the market expectations of 70. the data came after a
decline of Mar US Consumer confidence to 64.5 showing further
decreasing spending in US and jobs losing worries increasing the
market expectations of further Fed's cut in April can reach another .
5%.
The greenback lost grounds across the broad on this interest rate
outlook and weak consuming data after it could make a rally on the
stock market taking risk reviving wave started by a Fed's cut by just .
75% and fueled by JP Morgan higher valued buying bargain to 10$ from
just 2$ for each Bear Stearns stock. Also, the increased expectations
of US inflation slow down spurred energy and commodities corrections
versus the US dollar. The fed mentioned in its US assessment that
inflation is elevated but will moderate and Fed to monitor carefully.
The recent US Feb CPI figures have shown the same as both of the broad
figure and the core figure came unchanged and the market was expecting
0.2% increase for the Core CPI and a 0.3% rise for the broad figure
and as I have mentioned earlier the price deflator of the Q4 revised
down to 2.5%.
We are now at the end of the Japanese financial year and there can be
some cautiousness in the beginning of next year amid the current
uncertainty. The Japanese yen is waiting now for tomorrow first
quarter Tankan survey which is expected to be 13 for the large
manufacturing from 19 and 11 not the large non-manufacturers from 16.
The yen is still taking its clues from the trust in the stock market
as the first funding currency of the carry trade because of its low
interest rate which is just .5% currently unfazed of the Japanese
accumulated inflation pressure as Feb core National CPI which came
higher than the market expectation of just .9% to be 1% to increase
for the fifth consecutive month and Tokyo Mar yearly core CPI have
done the same and it was .6% in Mar. the market was expecting this
core of the capital just .5%. The impotence of this indicator came
from its outpacing of the national core figure by a month earlier
which means that it is a leading indicator to the market expectations
of the inflation outlook in Japan which is looking increasing putting
pressure on the BOJ to keep its interest rate unchanged in the near
term not following the Fed's cut to spur investment and liquidity . In
the beginning of this week and after the decline of the US stock
market by the end of last week, it has a boost from higher than
expected industrial production rise in Feb to 4.2% y/y from 1.2 in Jan
and just a monthly decline by -1.2% from 2.2% to drive the US dollar
lower than 99 before getting back up again above 100.
The single currency is still well supported after the continued
releases of solid growth data and hawkish ECB tone keeping the market
from expecting any cuts following the fed.
In his testimony on Economic and Monetary Affairs Trichet indicated
that if we had cut interest rates, we would suffer higher inflation
and Interest rates are there to deliver mid-term price stability. The
comments came after the release of optimistic IFO of Mar cam again
higher than 104 to 104.8 which is higher the 104.1 of Feb which made
Nerb's to say that further upturn from here would mean a bottoming out
and the germane growth is in good conditions and it is not in need of
interest rate cut now. We wait today for March EU HICP and it is
expected to be 3.3% again this month.
The British pound is still suffering after UK March Nationwide Housing
Prices y/y which came at -1.1% and the figure was much lower than the
market expectations of -3%.
We wait today for US Chicago PMI as a key of the manufacturing
performance last month. The reading is expected to be in the
contracting territory lower than 50 but up from last month 44.5 to
46.
Best wishes
FX-Recommends
FX Consultant
Walid Salah El Din
Mob: +20 12 465 9143
E-Mail: mail@fx-recommends.com
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