The US equity market is still playing the role of the leading indicator of the global markets at the current markets turmoil and credit crisis impact.

The grrenback has found strong support recently from the sell off of the equity market which seemed persisting after last week weak ISM manafacting index of October which reached 38 in the contracting area below 50 a which  refer to prolonged way before getting above 50 again and further time in the contraction and the recession than what was expected and evaluated. The oil and comodities prices are under pressure in these same expectaions which refer to a decline of demand globally.

The yen is still holding most of its recent gains versus the european currencies  causing strong crisizms from the japaneses owes of the japanese equity market as its negative impact on the japanese exporters versus their european counterparts who finds strong support from the massive easing stance of their central banks which is expected to continue. The japanese yen which is the first funding currency of the carry trades as it is very low yield which is .3% currently after the BOJ last cut by just  .2% gets strong support from the unwiding of the carry trades transactions.It is very senstive to the movement in the equity markets which is the current mirror of the credit crisis impact and the markets leading indicator.

The gold trading was mixed and volatile recently as the liquidity problems is underpinning the greenback from a side and the risk aversion is giving support to the gold as a reserve from another side amid the current missing trust sentiment but the inflation outlook which is looking down because of the decline of commodities and energy prices or the recession can put weights on the gold which is not making it the best to be bought at this current stance of growth slowing down which came accompanied with a lack of liquidity supporting the greenback.

Best wishes

FX Consultant

Walid Salah El Din

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