The single currency has started trading this week strongly across the broad underpinned by the Irish acceptance of the EU and IMF bailing out aids during the weekend to be the second this year following Greece which has had about 110b Euros while Ireland is expected to ask for about 80b Euros 60 of them for covering the accumulated budget deficit of the next 3 years and the 20 directly for supporting the ailing banking system of it which has suffered strongly after the credit crisis in the recent years and weighed on the country budget which decided to carry its banks losses during the crisis. The Britains have announced last week their readiness to support Ireland beside the EU and the IMF while Ireland was showing no need for this help in the beginning but suddenly in a faster than expected action, The Irishs have shown acceptance of the rescue package offered by the EU and the IMF which worth 1 trillion Euros and has prepared this year on the market worries about the debt stance in Euro zone which can spread out of it for bailing out ailing economies inside the Euro area for getting their deficit to GDP below 3% as Maastricht treaty pact. It looked that there is no other way but this in front of them while they face strong resistance in imposing new austerity measure as expected and difficulties to hike the 12.5% imposed corporate taxes which is the lowest in Europe. The single currency has opened on a gad versus the greenback and it is still trading above 1.37 as the market sentiment has been contained back by the debt problems in EU to be traded below 1.36 versus the greenback last week after the investors have been encouraged to start taking profits earlier this month after the Fed has actually taken its waited decision of the Fed of adding another 600B to its adopted quantitive easing policy of its buying of US treasuries till the end of June 2011 driving the greenback down across the broad pushing the single currency to be traded above 1.425 before the profit taken wave beginning fueled by better than expected release of US non-farm payrolls of October has shown adding 151k after losing 41k in September while the market was waiting for adding just 60k.
The British pound could get back above 1.6 versus the greenback underpinned by improving of the risk appetite after a close reached deal concerning the Irish debt and waited positive opening of the US stocks and gains in the Asian equities markets. The British pound has been underpinned recent by stronger than expected UK retail sales of October came up monthly by .5% and it was waited to be just .2% after falling in September by .5% and another CPI release of October came this week above 3% at 3.2% yearly which could maintain to the market the BOE worries about the upside inflation risks and cooling it down from taking further easing steps to stimulate the economy which is expected to show growing by 0.5% q/q as The National Institute of Economic and Social Research has expected in the third quarter. The British pound has been underpinned recently by the BOE keeping of its buying bonds plan as it is worrying about the inflation outlook for the second consecutive meeting against wide markets expectations of exceeding its plan more than it is currently at 200B Stg specially after the recent decision of the Fed of adding another 600B to its adopted quantitive easing policy of its buying of US treasuries till the end of June 2011 keeping its mortgages baked securities buying program at its same rate which is about 35B$ a month currently making the total planed pumping funds about 880B$ in what's been read as a devaluation of the greenback can be approved by BOE to some extent for containing the inflation pressure while it is still worrying the Asian economies which are about to take steps for containing inflation currently as China despite the G20 meeting and Obama's recent Asian trips which have not come out with what can be new to calm down these economies worries about US QE monetary policy stance which has already driven the prices of the energy and the commodities up which can increase the cost of their growth and force them to cool it down weighing negatively on their equities markets while you can see this week easily dear reader this week US October PPI coming out from US at just .4% below the market expectations of .8% and excluding the food and energy at -.6% while it was waited to be .1% and also Oct CPI which was expected to be up monthly by .3% from .1% in September coming at .2% and its core figure to be .1% from a flat reading in September came flat again which refer to the same Fed's concerns about the deflation forces which face the US economy and forced it to surprise the market by another 600B$ package of buying new debts while the market was waiting for a new package from 300B$ to 500B$ keeping its monthly buying mortgages baked securities at about 35B$ making the total expected pumped funds above 850B$ till the end of next June about 880B$ in what could be read as a devaluation of the greenback.
God willing, we have no important data today but EU consumer confidence of November which is expected to be -10 from -11 in October and ECB president Trichet's speaking to come.
Best wishes
FX Consultant
Walid Salah El Din
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