The market has seen the ECB worries about the single currency strength in Trichet press conference after the ECB decision to leave the interest rate unchanged at 1% giving a stronger evaluation of the current conditions than last meeting when he said clearly that Prudence and caution are of the essence in the present situation. He has just referred to the need of the current easing steps of the ECB as there is no realized inflation pressure yet referring to the new signs of improving in the banking and the financial sectors as the recent stress banking test said that even if the economy took another turn for the worse there will be no major European institutional falling. The single currency has suffered after his talking in spite of the current market optimism which weighing on the greenback.

We have seen a strong opening of the US equities market today after the declining of the US jobless claim this week by 33k to 521k from 554k last week while the market was waiting for just 540k keeping up the current investors' risk appetite which could contain the market sentiment in the recent days pushing the greenback down versus the higher yielding currencies for taking risk such as the Australian dollar which is remarked now with a stronger interest rate outlook than before after RBA had surprised the market by its decision of hiking the interest rate by .25% to be 3.25% which could support the gold further versus the greenback to reach a new record high today at 1058.60 versus with the Aussi rising to .9050 earlier today. The RBA has backed its decision this week to the materialized improving in the current economic conditions which are strongly stimulated by the Chinese growth and demand for the Australian exports which are mainly the raw materials such as the gold. The ties between the Chinese economy and the very rich Australian economy of commodities were working in this direction in the recent decades which could cap it from the negative impacts of the credit crisis in favor of this strong Chinese demand.

 

 

The British pound could found a technical support with the ending of the US session yesterday after breaking 1.5945 resistance as it has found a strong difficulty to break below 1.585, in spite of the pressure of the disappointing release of disappointing releases of UK manufacturing productions and industrial productions of August which has dragged it down already from above 1.60 to below 1.59. as August manufacturing productions slumped by 1.9% m/m and 11.3% yearly while they were forecasted to be up monthly by .3% and down yearly by just 9.3% and August industrial productions have fallen y/y by 11.2% while the market was waiting to have a declining by just 8.8% and while they have come down monthly by 2.5%, the market was waiting for increasing by .1%. The cable is still failing to break above 1.61 again after today's BOE decision to keeping its assets purchasing facilities plan unchanged at 175bln Stg and the interest rate at just .5%.

Best wishes

FX Consultant

Walid Salah El Din

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