The sterling is still under the pressure of BOE president Marvin king in front of the parliamentary committee who said yesterday that further deposit interest rate cut might be a useful supplement. The market has sold the British pound off after this dovish comment which lowered the current market discounting of the interest rate outlook in UK. King was one among 3 opposing voting members of the MPC meeting in July of adding just 50bln Stg to the buying bonds plan suggesting adding 75bln Stg referring to the possibility of public confidence damage in the recovery which can flatter it suggesting that the inflation could be under the BOE target for a sustained period.

The increasing of August UK  CPI y/y by just 1.6% while the market was waiting for just 1.4% and the core figure to 1.8% and the market was waiting for it to be just 1.6% could not change the market current discounting of the interest rate outlook in UK and the inflation pressure as this rate is still well below the BOE target which is 2% putting pressure on the British pound which is trying hardly to get above 1.65 after this declaration versus the greenback which was already depressed across the broad trading well above 1000$ after yesterday Bernanke's talking about a likely end of this technical recession but he was still cautiously optimistic when he was talking about the current labor market conditions and the need of confidence to spur back the lost jobs. We have seen yesterday that August m/m retails sales are getting above the double of the market expectation of a rising by just 1.2% at 2.7% from decreasing in July by .1% and also NY Sep Fed manufacturing survey is reaching 18.88 from 12.08 in August and it was expected to be 12.75.

The single currency which has been shocked by a weaker than expected release of the germane ZEW of September of the current conditions which came at -74 while the market was waiting for just -67.1 and the economic sentiment which came at just 57.7 while the market was waiting for 62 could get over 1.465 finally trying for 1.4719 which was its recent major peak versus the greenback on the 22nd of last December when the greenback was under the pressure of cutting the interest rate to zero to .25% and waiting for further quantitive easing steps from the Fed and now the crisis is looking over and the pressure came back again of the greenback from the increased risk appetite of the investors who are hoping in this waited recovery to push the prices of the stocks, the commodities and the energy up again causing an inflation pressure in the future which bid the gold above 1000$ versus the current weak greenback which is waiting for a holding back of the current taken easing steps by the Fed to find buyers again and this is looking not before a realized improving of the US labor market conditions as the Fed's president has declared nearly a month ago when he has indicated that the worst of the credit crisis is looking behind of us for first time. Dow has found stocks buyers above 9600 closing at 9683 points

God willing, we are waiting today from UK for August claimant count to be 24.6k from 24.12k and the unemployment to rise to 8% from 7.8% in July and from US, we wait for August CPI y/y to be up by 1.7% after rising by 2.1$ in July and the core figure to rise by the same rate of July which was 1.5% and further higher rates can push the gold up further weighing on the greenback which was already hurt by the increased inflation pressure over the producing level when we have seen August US PPI increasing m/m 1.7% while the market was waiting for just .7% yesterday.


Best wishes

FX Consultant
Walid Salah El Din

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