The equities market are still creeping up trying to get last January highs when Dow reached 10729 again keeping the pressure on the greenback to lose ground across the broad amid increasing on the investors' risk appetite containing the market sentiment but it is still building momentum at these levels tending to the upside. We have seen today an improving of US Trade balance of deficit of January to be just -37.29b$ while the market was waiting for-40.3 b$ and by god's will, we wait today for US retails sales of February to be up monthly excluding the auto sales by .2% and flat broadly with auto sales and US University of Michigan consuming sentiment preliminary reading to be 73.5 from 73.6 in February.

While the recent data are showing that the growing pace in US is still in its gradual pace with no signs of a double dip recession yet, it is still struggling in Europe which put pressure on the single currency from different sides giving the traders the reasons to sell it. The germane trade balance of Jan has fallen to just 8.7b euros while the market was waiting earlier this week for16b euros from 16.7b euros in December and also the germane total industrial productions of that same which were awaited to be up by 1% has come a slower pace at just .6% but the increased risk appetite has weakened the greenback giving relative strength to the single currency which is still depressed by its countries credit lowering rating and the situation in its governmental tries to get the European acceptance on its reforms which caused increased streets riots to hold back its current unsustainable deficit which has become 12% of the Greek GDP while it is required to be back below 3% on Maastricht treaty while it is widely around 6% in Europe at the current struggling growth after the credit crisis even the ECB could not stop any of its accommodative easing actions worrying about the current nascent recovery until now keeping the interest rate at 1% again last Thursday for a whole year which is undermined the single currency which could close hardly again above 1.36 last week is still unable to get above 1.37 which is forming now the upper band of its side way range versus the greenback which is holding while it is lower one is still at 1.344. By god's will, it is important today too to wait for Jan industrial productions of EU which are expected to be up monthly by .7% after a drop in December by 1.7% and down yearly by just 1.9% from falling in December by 5%

 

Also the cable could find support from this increased risk appetite in the recent days finding a place to be traded above 1.5 psychological level after a free falling in the beginning of last week to 1.4785. the cable has become very vulnerable to the downside after forming a lower peak below 1.584 resistance by the end of February and with the  breaking 1.51, the selling momentum has increased on news about a huge bargain between AIG and the British insurance company Prudential for buying the Asian parts of the first for about 35$ Bln while it has become politically unstable by UK preliminary elections as the conservatives' opposition party has lost its strong leading versus the labor ruling party on the recent polls results, with the exacerbating UK debt at the current higher inflation rates than Europe can keep the pressure back on the cable as UK has started to post its first net borrowing deficit month since the beginning of 1993 with the public sector borrowing in Jan reaching 4.3 B Stg while the market was waiting for covering 2.8 B Stg of the debt waiting Feb data which will be closely watched as this rates can bring its budget deficit ratio to GDP above 12% like Greece otherwise it looks in building up in UK while the efforts are emerging for staving this debt off in Greece.

Best wishes

FX Consultant

Walid Salah El Din
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