The greenback could gain momentum today pressing of the single currency to get down below 1.37 before bouncing above 1.38 again during the Asian session. The greenback has been underpinned since the positive release of US non-farm payrolls release of October by the end of last week which has shown adding 151k after losing 41k in September while the market was waiting for adding just 60k after October ADP Non-farm Employment change came earlier at 43k while it was expected to be 25k has dragged the single currency down to close last week at 1.403 versus the greenback retreating currently below 1.395 as these bullish data encouraging the investors to take profits buying back the greenback after it has faced strong selling across the broad after the Fed's decision to provide 600B$ package of buying new debts...

... while the market was waiting for a number from 300B$ to 500B$ which was a shock to the greenback which has fallen across the broad getting the Aussi above parity and the Asian currencies which have higher interest rate outlook currently for cooling down the prices and also the cable to 1.6298 and the single currency to cross above 1.417 reaching 1.4281 last Thursday making 1.458 whereas the pair lower high which has been formed on 13 Jan 2010 the main next resistance of the pair ascending way after bottoming at 1.1876 on 7th June this year amid the debt crisis which has effected negatively on the single currency since the beginning of this year with the market focusing on the Greece, Portugal, Spanish and Ireland debts situations which brought back to contain the market sentiment with the beginning of this week again weighing pressure on the single currency across the broad.

While the British pound could hold above 1.6 after The National Institute of Economic and Social Research has expected UK GDP Q3 to be up by 0.5% q/q following the rise of Q2 by 0.8% and also the BOE expectation of the inflation to stand above its 2% target through 2011 waiting for the growth to go up next year above 3% y/y. The British pound has been underpinned recently by the BOE keeping of its buying bonds plan as it is worrying about the inflation outlook for the second consecutive meeting against wide markets expectations of exceeding its plan more than it is currently at 200B Stg specially after the recent decision of the Fed of adding another 600B to its adopted quantitive easing policy of its buying of US treasuries till the end of June 2011 keeping its mortgages baked securities buying program at its same rate which is about 35B$ a month currently making the total planed pumping funds about 880B$ in what's been read as a devaluation of the greenback but BOE kept its plan again as it is unchanged last Thursday which refer to that even if there is adding to this plan, it will not have the MPC approving to the extent which can effect on the British pound negatively specially as the recent MPC minutes have shown 3 split ways in the MPC after Q3 GDP preliminary reading which surprised the market by coming up quarterly by .8% and the inflation which is still nearly at 3% y/y and needs to be contain after the rising of the commodities and energy prices across the broad which referred to the BOE acceptance of stronger sterling with the greenback weakness because of the Fed's quantitive easing accommodative policy which has no close end yet driving the gold to close last week just below 1400$ as expected after the Fed's decision which added momentum to it with the market concerning about the EU debt again to reach 1424$ this week.

Best wishes

FX Consultant

Walid Salah El Din
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