17/4/2009 - The Current Market Sentiment

The greenback is trading higher ahead of the release of the earning
reports of the first quarter of GE and Citigroup after yesterday
releases of the building permits and the US housing starts have
declined surprisingly in March. The housing starts slumped to .51m and
the building permits have fallen to .513m which put doubts about the
stability in the housing sector in US after the credit crisis as the
down side risks are still existing negatively impacted by the current
low level of consuming and business spending which lead to further
losing jobs.

The market is still waiting cautiously for the release of citigroup
quarterly earning by the end of the week after the recent
modifications of the accounting system to lower the loses in the banks
balance sheets because of their holding of toxic assets. On the 10th
of March Citigroup CEO Vikram Pandit has mentioned profitability in
the first 2 months of 2009. this announcement has triggered a positive
sentiment towards the future performance of the banking sector in US
after the credit crisis and derived the stock of the bank up from
below 1$ to about 4$ after 5 quarters of loses amid the recent
recovery of the stocks market after reaching its lows a day after
these announcement. This announcement is looking serious to the recent
rally and can put it in a serious check which caused this mixed
trading this week until now and god willing it is to be by the US
session.
As we have mentioned earlier, the single currency has suffered from
the benign inflation levels currently as it can smooth the way for the
ECB to take further easing steps to stimulate growth with no potential
upside inflation risks over the medium term as it cares. March HICP
came as expected and as the same of Feb at .4% m/m and .6% y/y and it
could break 1.31 level today amid wider than expected deficit release
of the EU reached 12.8B m/m in Feb and the market was waiting for just
5B from 10.9B in Jan.

The cable also came of its high above 1.5 yesterday. The cable was
well-supported after breaking out above 1.48 earlier in the beginning
of the week after thin trading between 1.479 and 1.458 by the Easter
holidays but it was meeting  profit taken directly after crossing 1.5
with no major change of the current market sentiment to support it
further.

The gold was undermined this week by these benign inflation releases
from US and EU and the break of 888$ could trigger stop loss orders
pushed the gold below 970$ today on accumulating selling on these
worries about the dovish inflation outlook. March US CPI figures
excluding the food and energy came higher than expected at .2% m/m and
1.8% y/y and the market was waiting for .1% m/m and 1.7% y/y but the
broad figures came down by .1% monthly and .4% yearly ensuring the
deflation pressure in US following yesterday PPI release of the same
month which came lower than the market expectations of -2.2% yearly
and 0% m/m at -3.5%y/y and 1.2% monthly. We wait later today for the
release of the US Michigan consuming sentiment preliminary release
which is expected to be 58.5.

Best wishes

FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com
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