The British pound has been under pressure across the broad undermined by more than expected publish sector net borrowing was expected to be just 16.8b Stg but it has shocked the markets by 22.3b Stg in November from 8.6b Stg in October. The cable traded below 1.55 again reaching 1.5434 breaking below 1.547 level whereas it has found support last week. The key supporting level is still away from here at 1.528 while the next resistance should be at 1.5655 then 1.584 and 1.5907 where it has formed its main recent top and today we wait for UK Q3 GDP figure which is expected to be up by .8% and also UK current account deficit which is expected to reach 8.4B Stg in the third quarter from 7.383B Stg in the second quarter and also the BOE recent meeting minutes which are expected to show a split of talking about adding more funds to its current 200B Stg buying bonds plan but the currencies market speculators really want to know more about their appreciation of the inflation upside risks pressure which cap them from adding more funds to this plan amid depreciation of the pound value recently. The BOE has kept its plan unchanged for the fourth consecutive meeting unfazed of the Fed's quantitive easing policy which got into its second round and the ECB which declared its readiness to buy more sovereign governmental bonds preventing the debt contagion in the Euro zone providing the required money for giving stability of its financially market for spurring spending can move the growth faster with a lower costs of borrowing than what can be paid the ailing countries of debt in the normal bonds auctions without the ECB supporting but the MPC is still looking worries about the potential risks outlook of inflation with UK CPI reading still above 3% yearly.
The single currency is still in a weak position with market worries about the debt contagion in the Euro zone and their countries bonds auctions results and specially Spain, Portugal and Ireland and the credit rating downgrading of these debt ailing countries as we have seen Moody's downgrading of Irish long tern debt five notches to B
with a negative outlook from Aa2 by announcing that it can downgrade the Spanish long term debt rating of Aa1 too last week threating about 30 Spanish banks of downgrading of their rating this week watching the Portugal’s debt for a possible downgrading by 2 notches too containing the market sentiment which shrugged off the better than expected economic data from Germany which is driving the EU economic growth up as we have seen recently the germane IFO business climate recording new historical new high in December at 109.9 since the beginning of it in 1991 after it has made 109.3 in November and the germane retails sales figure of October rising up by 2.3% monthly while it was expected to be up by just 1.3% after falling in September by 1.8% which helped EU consumer confidence getting up to new 3 years high and lead November EU manufacturing PMI index to be above 55 again at 55.3 from 55.5 in October. The single currency is trying to get back above 1.318 again but failing to get over it can open the way back to 1.306 and then the recent supporting level at 1.297 whereas the pair has met new buying interest recently and passing it can lead to 1.26 as the main bottom of its previous ascending rally which has ended at 1.4281 versus the greenback which was well supported today despite the gains of the equities market which started in the Asian session pushing the stocks prices up putting pressure on the greenback after it was little changed from the beginning of the week trading in a tight range across the broad amid expected thin trading in the days ahead before the charismas holidays but it could cover its loses across the broad pushing down the single currency which was supported by the Chinese pledge to support the European efforts for solving their financial problems but these news could not live longer with the market which pushed it down again versus the greenback which had better than expected data recently like December Philadelphia Fed Manufacturing Survey rising to 24.3 while it was waited to be just 14.1 from 22.5 after NY empire state manufacturing index coming up to 10.6 and it was forecasted to be 3 from -11.1 which could support the US stocks and Dow to keep most of its gains reaching new 2 years high yesterday at 11549 and God Willing, we are waiting today for US Existing Home Sales of November to be 4.75m from 4.43m in October and US Q3 GDP to be 2.8% from 1.7% in the second quarter yearly and by the end of the week for New Home Sales to be .3m from .283m in October.
Best wishes
FX Consultant
Walid Salah El Din
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