The currency market is moving in sideways eyeing on the changes of the equity markets. The greenback is trading down versus the single currency edging up above 1.3 while it gaining ground versus the British pound which is suffering from Darling's admitting of a contracting in UK can reach 3.5% this year. Darling has declare that the government is adopting an easing policy to stimulate growth by increasing the imposed taxes on the rich ones, increasing the governmental spending and encouraging the borrowing which can reach £175bn this financial yearor 12.4 per cent of gross domestic product before falling to £173bn in 2010 and £130bn in 2011. the cable reached 1.4396 before retracing above 1.45 again as it is trading currently at 1.4515.

The single currency was under pressure recently trading below 1.3 versus the greenback. The single currency suffered recently the continued declines of the inflation rates which can expose the EU economy to deflation risks which have been a downplayed probability by the ECB president Jean Claude Trichet in his press conference after the ECB recent cut by just .25% on the second day of this month. These current low inflation up side risks can smooth the way for the ECB to take further stimulation steps as March HICP which came as expected last week and as the same of Feb at .4% m/m and .6% y/y.

Yesterday, the treasury secretary  Mr. Geithner could calm down the market and staving off the loses that were facing the stock market in the beginning of this week when he expressed his trust in the banking sector to lend again and make profits in the coming period while There was a spreading believe recently that the worst of the crisis is over after the recent earning reports of the first quarter last month which referred to an ability of making profits again and improving of the consuming sentiment in US but the jobs shrugging off is still on for drawing down the costs and shrinking the activities for meeting the demand that can spur growth back again which can cause a second round effect and the market has focused on the huge amount of the toxic assets which are still existing in the balance sheets of the banking sector which can exceed 4 trillion$ as the recent evaluation by the IMF and it is well known to the market that these toxic assets have been actually underestimated by about 20% because of the FASB changing of the accounting rules.

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FX Consultant
Walid Salah El Din

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