The improving investors' risk appetite is still containing the market sentiment pushing the equities markets up and also the commodities and energy prices on expected better growth rates in US this year and on better earning reports to come expressing about the fourth quarter of last year which have started by the end of last week with better than expected increasing of JP Morgan profits by 47% driving the banking sector stocks up and Dow to close last week up 112 points at 11787 to be the 7 consecutive weekly rising in raw as the confidence has been brought back to the US recovery after easing last year by better than expected series of economic data has been released out since the end of last year like December ADP Employment release which came at nearly triple of the market expectations of just 100k at 297k added jobs from 93k in November and Nov US factory orders data which have shown rising by .7% while the market was waiting for decreasing by .4% after falling in October by .7% and also both of US December manufacturing index and non-manufacturing index getting better to 57 and 57.1 consecutively after US December Chicago PMI had come at 68.6 while it was waited to be 61.5 from 62.5 in November which are the best since the ending of the credit crisis as the market sees now that the US economy is much more credible for better business spending despite the labor market which is still looking unstable and is still struggling lagged behind the other sectors performance as we have seen the bigger than expected weekly jobless claim release which came at 445k from 410 a weak earlier while the market was waiting for improving to 404k and December non-farm payrolls which have just added 103k while the market was waiting for 135k putting pressure on the greenback which has started to run out of stream across the broad after reaching 1.2873 on rumors about European efforts to convince Portugal to join the bailing out package following Ireland but the Portuguese denying of the need for this made package by European countries and the IMF and the Japanese promises of buying European bonds this month could help it to rebounds dueled by markets cheeriness of successful bonds auctions in Portugal , Spain and Italy to close last week at 1.3382 after another push from Trichet's reference to building inflation pressure in the Euro zone after the ECB meeting decision of keeping the interest rate unchanged at 1% again which can suggest that there is another pressure on the ECB for capping its funding reducing its provided ample of liquidities fearing of further inflation pressure directing some of their care to the easing value risks of the single currency.
The British pound could also add more gains reaching 1.5881 getting use of the pressure on the greenback for taking risks but it is still exposed to find resisting pressure protecting 1.5907 whereas the cable failed to pass recently forming its recent top where it has fallen to 1.534 before finding support and strength to rebound by the lower than expected figure of non-farm payroll of December which has hit the greenback recently after it has been under pressure because of Q4 2010 mortgage defaults value which rose for the first time since Q2 2009 and the sudden slump of December services PMI below 50 at 49.7 in the contracting territory to temper the positive sentiment towards the UK economy and the British pound which has been triggered by December manufacturing PMI rising to 58.3 while the market was waiting for the same reading of November at 57.5 driving up the confidence in the UK economy reducing some of the market discounting of adding more funds to the BOE buying bonds plan which has become ruled out later by the MPC increased worrying about the inflation upside risks while UK CPI is still well above its 2% target and also above 3% in the recent months and it can accelerate further to 4% yearly by God's will putting the UK economy under stagflation pressure this year as the economy is not yet at the shape which does not need of its easing measures.
Kind Regards
FX Consultant
Walid Salah El Din
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