The risk appetite has improved again by the bullish release of US Philadelphia Fed Manufacturing Index of February which was expected to be 21 from 19.3 in January and it has surprised the market by 35.9 and the price paid of it has come up to 67.2 from just 54.3 showing strong pricing power following the release of US CPI of January which was expected to be .2% m/m and came higher at .3% while the core figure excluding the food and energy was expected to be .1% m/m and came also up at .2% from .1% in December and this stronger than expected prices data over the consuming level have come following earlier rising of Jan broad figure of US PPI by .8% monthly and also the core figure excluding the food and energy by .5% while it was foreseen to be just .2% as the same of December showing growing prices over the producing and wholesales levels too which can be resulted from the rising of the commodities and oil prices which are still expected to be well-contained over the long by the fed which has actually upgraded its growth expectation of this year from 3% to 3.6% to 3.4% to 3.9% helping the investors confidence to load more risks pushing the US stocks up further again weighing on the greenback across the broad.
And from another side, The cable has been supported by the release of Feb UK CBI industrial output which surged to 32 from 17 in January and exports orders which came at 11 from 0 in January which is the highest rising since 1995 to get over 1.61 facing again the resistance at 1.6182 after it has eased from it following King's comments which brought down the interest rate outlook in UK after it had been supported by the rising of Jan UK CPI to 4% earlier as his comments have shown a greater than expected appreciation of the growth down risks which face the UK economy which has already shrunk in 2010 Q4 GDP by .5% quarterly showing emerging down side risks can face the growth in the case of hiking the interest rate by the required pace to anchor the inflation as it is to cool the economy further tackling the investments which are needed for spurring growth and so the cable has fallen below 1.60 after these comments which have followed the higher than expected release of UK jobless claimant rising by 2.4k while it was expected to decrease by 3.3k as a reflection of the current struggling economy in UK which is facing emerging stagflation risks at the current high prices capping the BOE ability to take a clear tightening or easing direction currently and God willing, it looks that the only available option to the BOE currently is to let the pound appreciate for containing the inflation helping the market trust in it which has been dampen by the recent weak economic releases from UK triggering these recent comments by King and the inflation quarterly report release which has shown to the market that it is required now from the UK economy to come over this phase by finding the sluggish demand to produce at these current high prices which face it as the action of tightening at the required rate for containing these prices should have strong negative impact on growth which is required strongly too.
Now, after the cable could find support at 1.5985, by god's will, it should face again this same resisting level at 1.6182 and then 1.6275 which has been reached previously with the bullish release of UK Service PMI of January rising above 50 again into the expansion territory at 54.5 above the market expectations of 53.5 from 49.7 in December but it could not even get the formed main resistance at the top formed at 1.6296 which has been reached in the beginning of last November when the greenback was under pressure from the Fed's decision to add another 600b$ in another step of its QE policy for stimulating the economic growth in US while its next expected supporting level is at 1.5962 and it can be followed by 1.582 and the breaking of it can lead to testing 1.5747 again.
The single currency could also get over 1.36 versus the greenback which has been under pressure across the broad on its low cost as a main funding currency of taking risks in the benefits of the higher yielding currencies such as the Euro which could have a higher bottom at 1.346 above 1.3427 following the recent Fed's upgrading of the US growth to have a better technical look to face again 1.364 and then 1.374 and the breaking it can open the way for the recent formed main top at 1.386.
The single currency has come under pressure this week as the market sentiment has been contained by seen weakness in the germane industrial pace by the end of last year as the falling of December germane industrial productions by 1.5% while they were expected to be up by .2% from decreasing by .6% in November and also the dovish falling of Germany factory orders by 3.4% monthly in December from gaining 5.4% in November while the market was waiting for shrinking by 1.4% to show easing of the demand of capital good from Germany which affected negatively on its 2010 Q4 GDP preliminary reading to be lower than the market expectation of .5% at just .4% and these dovish figure has come with the release of February germane economic sentiment ZEW which was expected to be 20 from 15.4 in January shocking the market by getting back again to 15.7 to weigh negatively on the single currency which was depressed by the European financial ministers announcing about their eagerness for moving up their ability for lending to 500 billion euros from the beginning of 2013 which show to the markets that their current 250b euros sharing package with the IMF is not enough to save the expected requests of borrowing and also by increased probability of the needs of rescue WestLB bank in Germany and but the pressure has eased by its announcement of selling four parts of it having new structure to get over its accumulating loses by 2015.
The gold rose also as a mirror of inflation by the new rising of the prices in US while the fed's is expected to hold its easing policy further and also the stronger than expected industrial and manufacturing data from UK and US which suggested stronger than expected demand for oil pushed up its prices which are still fueled by the concerns about the supplies from middle east as the unrests in the countries of this strategic important area and so the gold could get over 1380$ again and it should face the recent resistance at 1394 then the psychological level at 1400$ and the breaking of can test lead to the recent top of it at 1423$ and the recorded high at 1430$
God willing, it is important to wait today for UK retail sales figure of January to be up monthly by .6% after declining in December by .8% and yearly by 4% and we wait also to hear more from the BOE governor King and the Fed's chairman Bernenke.
FX Market Strategist
Walid Salah El Din