The cable is trading below 1.56 ahead of the release of UK public sector net borrowing of August today which is expected to be 12.2b Stg from 3.173b Stg and these data are important after last week King's remarks that debt situation of UK which needs to a plan be much more credible. The cable came under pressure across the broad yesterday after the release of UK mortgages approvals which came at 45k in August and M4 Money supply which were -.2% while the market was waiting for increasing by .2% from .4% in July showing an easing of the inflation pressure breaking 1.5635 strongly reaching 1.5575 but with Moody's restoring confidence in UK AAA credit rating, the cable could climb to 1.562 but it could not get over 1.5635 to slide back trading below 1.555 unfazed of the gains of the equities markets, Despite US NAHB Housing Market Index remaining at 13 in September while it was expected to ascend to 14 as the market is waiting for better economic assessment from the Fed today...

after its interest rate decision after the better than expected data of August which has shown US ISM manufacturing index coming back up to 56.3 against the market expectations of easing further to 53.5 from 55.5 in July and US Conference Board's Consumer Confidence which rose to 53.5 from 50.4 in July while it was forecasted to be just 51 and US non-farm payroll which have shown losing of just 56k instead of 110k which have shown losing of just 56k instead of 110k which meant to the investors that there is no strong downward momentum of the US economic growth can cause a panic reducing the probabilities of having a double dip recession which has looked a concern of the Fed in its recent meetings with the US labor market struggling performance which can tackle the market trust to spend for consuming and housing at this stage of recovery which is still in need of the Fed's QE easing policy.

The fear about the US growth has contained the market sentiment in August after the dovish release of July US non-farm payrolls which have lost another 131k and shown a down revision of June losing of 125k to 221k weighing negatively on the US equities markets pushing USDJPY below its 15 years low reaching 83.57 and the US treasury yields on another wave of losing trust forced the Fed to step forward in its quantitive easing policy buying more Mortgage backed securities and rolling over it’s holdings of treasury securities as they mature before this deterioration can have further negative impacts on the consuming and capital spending and to inform the markets that the Fed will not stand seeing the economy falling back in a second dip recession with no action even with the interest rate near 0%.

So, the market is waiting today optimistically to have better evaluation of the current economy conditions after these recent data  can restore more confidence in the markets and the US economic activity after they have said in their recent assessment that it is likely to remain weak for a time anticipating that the Fed's policy actions to stabilize financial markets, institutions, fiscal and monetary stimulus and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability as the underlying inflation have trended lower in recent quarters with substantial resource slack continuing to restrain cost pressures over the longer term keeping the inflation expectations stable.

By God's Will, it is important also to wait from US for august Housing starts to be .55m from .54m Building permits to be as the same as July 56m. 

Best wishes


FX Consultant

Walid Salah El Din

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