The Chinese new requesting for reducing the banking sector reserved amount of liquidity available for lending by another .5% after cutting it 6 times last year could temper the market sentiment weighing negatively on the dividends in Asian and EU session while the US equities markets were off for the martin Luther King holidays but it has appeared on the future prices of US indexes which refer to a negative opening as it looks that china is still worrying about the inflation which hit 28 months high last November by 5.1% to put pressure on the commodities and energy prices on growing market expectations of cooling of the Chinese demand for curbing the crediting and curbing the prices at the current levels which forced the gold to fall below 1360$ support for a while in the beginning of this week before rebounding back above it trading currently at 1362$ while its next supporting are standing at 1329$ then 1315$. The gold has been under pressure recent by series of good US economic data have brought back the market confidence in the US economy and the risk appetite of the business spending in the greenback which is expected to be much credibly wanted this year with better growth outlook containing the markets sentiment currently pushing the US stocks up in the beginning of this year.
The single currency came also under pressure receding below 1.33 trading currency at 1.328 as the market uncertainty about the next EU Financial ministers meeting this week in Brussels as the calls for adding new funds to the EU and the IMF package for lending the EU debt ailing economies have increased recently putting pressure on the Fin Ministers to come out with what's new to add more confidence in the debt market and the single currency dominations creditability 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 despite the worries about the US labor market which are still tempering this market sentiment as we have seen 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 but again the labor data came disappointing by the recent 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 to allow the single currency to get back some of its loses underpinned by repeated 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 which is waiting today EU ZEW economic sentiment of January to be 17.3 from 13.8 in December.
While the British pound is still trading above 1.59 after stronger than expected housing prices data as UK Jan Right move housing prices index has risen up by .3% after falling in December by 3% and RICS Housing prices balance had improved to -39 in December 2010 from -44 in November while it was expected to be just -42 to be in line with the recent MPC members meeting last week which has shown their worrying about inflation as 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 and god willing we are waiting today for UK CPI of December which is expected to be up yearly by 3.3% as the same as November which can show that the UK economy is exposed to stagflation risks this year as it has become ruled out to have a new added funds to the BOE 200b Stg buying bonds plan while the economy is not yet at the shape which does not need of its easing measures. The cable rose to 1.595 before easing back below 1.59 but it is still expected to find intermediate support at 1.5835 where it has tried to for a new base for ascending up while breaking this level can expose it to fall further to 1.57 then 1.558 while the main supporting level is now at 1.534 where it was its recent bottom.
Kind Regards
FX Consultant
Walid Salah El Din
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