It looks that the single currency has obeyed to the correction requests finally today breaking 1.39 versus the greenback again looking for facing 1.383 supporting level again whereas it has bounced back to 1.40 after the disappointing release of September non-farm payroll which lost another 95k while the market was waiting for nearly a flat reading.

The cable is waiting today for important inflation figure of September after the BOE has surprised the market last week by keeping their 200B Stg buying bonds plan as it is and the interest rate unchanged at just .5% while the market was waiting for increasing of this package by another 25b to be 225b and the reason of this decision can be in the BOE inflation worries which make today figures very important to the British pound as we wait for Sep UK CPI is expected to stand above 3% at 3.1% again and the core to get down to 2.6% from 2.8% in August after we had seen increasing of the PPI input prices of September by .7% and the output prices by .3% while the market was waiting for .3% for the first and .2% for the second last week.

MPC member Possen referring to the BOE readiness to take further easing steps has weighed on the British pound recently especially after the recent release of UK public sector net borrowing of August which was expected to be 12.2b Stg from 3.173b Stg and came at 15.3b Stg and King's recent remarks that the British debt is in need to a credible plan.

God Willing, it is important too to wait for the FOMAC minutes of its recent meeting which sparked the recent greenback weakness on increased market speculation of taking further easing steps by the fed for stimulating the economic growth which eased in the second half of this year. It is important this week too to wait for the CPI figure of September which is expected to slowdown to be just .2% from .3% monthly and if we are to have negative figure, this can bring back the deflation concerns of the fed to the market which can effect negatively on the greenback and open the door to the fed to take further easing steps unworried about the inflation currently in a second round of its quantitive easing policy buying more Mortgage backed securities and rolling over it’s holdings of treasury securities as they mature before the 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%.

Best wishes


FX Consultant

Walid Salah El Din

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