10/3/2008 - the current market sentiment

The single currency is still sup****ted after Trichet's hawkish
comments which figured that the ECB main worry is inflation as he has
mentioned that the inflation is expected to be well above the 2%
target in the short term. He didn't signal any clear warnings about
the recent Euro appreciation limiting the probability of an
intervention in the forex market to limit this surge but he has just
repeated that excessive volatility in the forex market is undesirable.
He added that the short term growth risk is to the down side while
inflation is to the upside and there were no calls for cut or hike.
the market has downplayed the expectations of a cut following the fed
by the end of this half of the year pu****ng the single currency up
further to signal a new all times high just after the disappointing
waited Jan Non-farm payroll which came down to -63k before a profit
taken wave dragged the pair to just a believed correction to 1.5313 as
the same dovish sentiment is expected to come back again  pressing on
the Fed to cut interest rate further pu****ng more liquidity to the
financial market to sustain growth.

Japanese yen is expected to get the same benefit too adding to that
March repatriations as the end of the financial year in Japan and the
risk aversion current wave which can triggered further carry trades
unwinding. As the market wants to see a sustained growth to put money
and take risk not just funding solutions can be capped with the
current weak consuming sentiment and high commodities and energy
prices which can be fueled by these easing actions and can form a real
challenge to this economic bottoming out cycle this once. The
speculators want to see results of this new 200bln funding plan to
tackle the recession even in the market sentiment. Further equity
selling and US interest rate cut can push the Javanese yen lower than
the 100 psychological level.

After The British pound broke the psychological level at 2 after the
BOE decision to hold interest rate unchanged as expected, the door has
become opened for further GBP buying as the decision has become behind
of us with no surprises. The cable became well-buoyed After the robust
PMI service index which reached 54 eliminating a lot of market
expectations of further cuts following the Fed and any cuts would be
gradual in appreciation of the upside inflation risks as the current
commodities and oil prices as the UK CPI is
expected to be well above 2% in the near term. The pound can get
sup****t till the UK inflation quarterly re****t at this current
sentiment.




Best wishes



FX Consultant

Walid Salah El Din

E-Mail: mail@[EMAIL PROTECTED]