6/1/2011 - The Current Market Sentiment

[walid]

The confidence in the greenback is still ascending better than expected data reflects bullish economic growth outlook in US and better demand for the US dollar borrowing underpinning the US bonds yields helping the equities markets and the business spending driving the gold prices down after December ADP Employment added triple of the market expectations with 297k added jobs from 93k in November while the market were waiting for just 100k to underpin the growing positive sentiment towards the US economy which has started last week by US December Chicago PMI which came at 68.6 while it was waited to be 61.5 from 62.5 in November which show that we can have stronger than expected and last week weekly jobless claim coming at 388k while the market was expecting 412k which show that there can be improving of US labor report data which are expected to come by the end of this week showing that there is a rising of the US non-farm payroll of December by 135k after adding just 39k in November and also this week by better than expected Nov US factory orders data have shown increasing by .7% while the market was waiting for decreasing by .4% after falling in October by .7% and also US ISM manufacturing index which rose to 57 from 56.6 in November.
The market sees now that the US economy is much more credible right now driving the greenback up across the broad even versus the commodities and the energy prices which fuel this growth outlook asking for the greenback weighing negatively on the Aussi which came back to parity with the it driving the gold down with better business sentiment getting out the money from the safe haven stance pushing it to test its next supporting level at 1360$ which can be followed by 1329$ and 1315$ with investors rising confidence in the greenback which has been boosted from another side this week by the announcement of the fed's recent meeting minutes which have shown easing of the fed's fear about deflation and appreciation of the yield rising with rising confidence in the US growth outlook which can increase the borrowing and the prices too easing growth downward pressure.
While the Single currency could not also keep any of its gains above 1.34 to ease back below 1.32 heading to its recent supporting level at 1.3050 which could not help it to pass above 1.35 to be the same upper band since the pair has found support at 1.297 supported by the ECB announcement of underpinning the liquidities in the bonds market with successful Spain and Portuguese auctions but it is now looking heading back to this level despite December EU PMI manufacturing index which rose above US to 57.1 and the recent continuous improving of the market risk appetite which came by the greenback side this time as the market is still worried about the debt contagion inside the Euro zone gloomy by the Estonia recent adoption at this time focusing on the downgrading probabilities of the credit rating of the Euro zone ailing countries of debt which have fallen recently on these countries with negative outlook of their debts as we have seen recently Portugal which has been downgraded by Fitch one notch to A+ with a negative outlook following Ireland which has been downgraded five notches to B with a negative outlook from Aa2 by Moody's which has announced that it can downgrade the Spanish long term credit rating of Aa1 too.
While the British pound was the big gainer with rising of December manufacturing PMI to 58.3 while the market was waiting for the same reading of November at 57.5 which brought back some confidence in the UK economy reducing some of the market discounting of adding more funds to its buying bonds plan getting off some of the pressure on the British, the pressure came back again with rising of Q4 2010 mortgage defaults value for the first time since Q2 2009 and December services PMI suddenly falling below 50 at 49.7 in the contracting territory to temper this positive sentiment towards the UK economy weighing again on the British pound.
God willing, it is important to today for US jobless claim which has come last week with falling to 388k while the market was waiting for 412k to start the positive sentiment and later this week for US labor report of December which is expected to show 135k rising of the US non-farm payrolls after 39k in November.
Kind Regards

FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com