God Willing, the market attention will be paid today to the BOE to know whether or not it is to take further easing steps adding more funds to their current 200b Stg buying bonds following US or even the ECB which declared its readiness to buy more and 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 than what can be paid in the normal bonds auctions without their supporting or the MPC will be worried about the inflation upside risks outlook with UK CPI reading still above 3% yearly reaching 3.2% in October will cap them again from taking such steps especially after The National Institute of Economic and Social Research has seen UK GDP recent quarter to November up by 0.6% from .5% to October.
The single currency is still under technical pressure after failing to get over the area from 1.3385 to 1.3425 versus the greenback which can open the way to 1.359 following by the recent previous top at 1.379 and this can be a stronger level as breaking it can open the way again to 1.4 psychological level while the way down should be met by supporting level at 1.306 then the recent supporting level at 1.297 whereas the pair has met new buying interest recently and where the pair has formed a previous intermediate bottom of its rally which has ended to 1.428 and breaking it can lead to 1.26 as the main bottom of this previous ascending rally which has ended at 1.4281 by the release of US non-farm payroll of October which has come better than expected adding 151k after losing 41k in September while the market was waiting for adding just 60k encouraging the investors to take profits covering their greenback selling as the Fed has actually taken its waited decision of adding another 600B$ to its adopted quantitive easing policy of buying US treasuries till the end of June 2011 which was weighing negatively on the greenback but this greenback buying sentiment has not stopped there as the profit taken wave has found momentum from the market worries about the debt contagion inside the Euro zone which increased in November containing the market sentiment weighing negatively on the single currency to get down below 1.30 and hurting the risk appetite of the investors which has been hit once again by the tension in the semi Korean island hurting the markets pushing the inventors to square their carried trades further buying back the greenback and the Japanese yen and pushing the gold to get over 1380$ resistance breaking above 1400$ psychological level again underpinned by the rising of oil prices which are widely expected in the markets currently to go above 100$ next year with the recovery getting momentum and also the ECB promises to give unlimited funding of the European debts exposure of these ailing countries at least in the short term putting unavoidable carried risks on the shoulder of the ECB by a huge ample of liquidities can be injected in the nerves of the EU economies as we have seen recently the successful Portuguese and Spanish auctions with announced ECB supporting of these bonds prices lowering their yields and giving stability to the markets which has been in turmoil last month helping the Single currency to find support finally bouncing back from 1.297 last week to test 1.342 this week despite the rising of the costs of covering these auctions but Trichet has come back to declare the ECB readiness and sticking to its previous pledges of buying more bonds could restore more confidence in the markets helping the European equities markets to keep its last week gains until now which have been triggered by these auctions despite the weaker than expected US labor report of November has contained the market sentiment by the end of the week as it has shown an unexpected rising of the unemployment to 9.8% from 9.6% in October and disappointing figure of the non-farm payrolls were expected to be around 150k shocking the market by adding just 39k weighing negatively on the European stocks market which started this week contained by the probability of having more added funds to the current offered bailing out package with the IMF which can have more funds from US for this purpose but as it was expected, Merkel has come out to rule out going forward to this in the near term which supported the single currency but that does not object that there can be a need of this later and before 2013 when the working of this current one ending if the debt position of those ailing countries exacerbated and faced further weakness of their growth pace lagging behind Germany which has grown by .7% in the third quarter this year while Greece has shrunk by 1.1 while the EU growth average was just .4%.
This current weak growth rates can continue as long as we see the US investment and consuming spending are still struggling and unable to create enough jobs to move the growth up sacking for further help from the Fed which may fund itself forced to inject more and more funds pushing the commodities and energy prices globally up while US has not get out from the risks of deflation forcing the other countries and especially the Asian to curb the investment and cooling their economies as we see in Korea and China currently criticizing this quantitive easing policy of US which is hurting their economic growth and has no clear end yet as long as the US labor market is still struggling and that's beside the tax cuts which are still held since Bush's presidency and it has been decided to be kept again this week.
Best wishes
FX Consultant
Walid Salah El Din
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