The British pound could get back above 1.6 versus the greenback underpinned by improving of the risk appetite during the US session after better than expected release of Nov US Philadelphia Fed manufacturing index came at 22.5 and it was expected to be just 4.5 to calm down the markets after this week shock of US New York empire states manufacturing index of October massive falling to -11 while the market was waiting for 11!. The British pound has been already supported by stronger than expected UK retail sales of October came up monthly by .5% and it was waited to be just .2% after falling in September by .5% and another CPI release of October came this week above 3% at 3.2% yearly which could maintain to the market the BOE worries about the upside inflation risks and cooling it down from taking further easing steps to stimulate the economy which is expected to show growing by 0.5% q/q as The National Institute of Economic and Social Research has expected in the third quarter.

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 can be approved by BOE to some extent for containing the inflation pressure while it is still worrying the Asian economies which are about to take steps for containing inflation currently as China despite the G20 meeting and Obama's recent Asian trips which have not come out with what can be new to calm down these economies worries about US QE monetary policy stance which has already driven the prices of the energy and the commodities up which can increase the cost of their growth and force them to cool it down weighing negatively on their equities markets while you can see this week easily dear reader this week US October PPI coming out from US at just .4% below the market expectations of .8% and excluding the food and energy at -.6% while it was waited to be .1% and also Oct CPI which was expected to be up monthly by .3% from .1% in September coming at .2% and its core figure to be .1% from a flat reading in September came flat again which refer to the same Fed's concerns about the deflation forces which face the US economy and forced it to  surprise the market by another 600B$ package of buying new debts while the market was waiting for a new package from 300B$ to 500B$ keeping its monthly buying mortgages baked securities at about 35B$ making the total expected pumped funds above 850B$ till the end of next June about 880B$ in what could be read as a devaluation of the greenback.

In this same time and after the market has got the Fed's easing actions out of its focusing, the single currency has started to get back to its main debt problems which it is facing since the end of last year containing the market sentiment again driving it to be traded below 1.36 versus the greenback as the worries have renewed about the debt crisis negative impact on the single currency and the debt financial situation of Greece, Portugal, Spanish and Ireland which can face further austerity measures effecting negatively on the current market sentiment and the single currency stability after its recent rally across the broad which encouraged the investors to start to take profits especially after the better than expected release of US non-farm payrolls of October has shown adding 151k after losing 41k in September while the market was waiting for adding just 60k.

God willing, we have no important data today but we have speaking from Fed's chairman Bernenke and the ECB's president Trichet today  

 

Best wishes

 

FX Consultant

Walid Salah El Din

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