After the equities markets selling off had calmed down, the single currency inability to get back above 1.244 sliding below 1.22 after retracing from 1.2235 versus the greenback could bring back the gloomy worries about the debt crisis and the single currencies assets backed securities domination again encouraging the risk aversion.
The markets were in increased worrying about the crisis current conditions and negative impacts in the future after the massive falling of the single currency versus the greenback and the royal bank of Scotland warning during the weekend that the single currency can reach parity with the greenback and Trichet's reference to similarity of the current exacerbating situation to the conditions by the falling of Lehman Brothers which forced it to open this week below 1.233 which was the formed main bottom of October 2008 amid the credit crisis while it was trading above 1.3 versus the greenback after the announcement about reached agreement with the IMF to provide 750 billion euros in a rescue package plan under the request of the European countries which are facing debt problems opening the door for the ECB to start discussing and buying European bonds by the volume which it sees suitable after the market has been disappointed by Trichet's comments about not discussing this issue in the ECB previous meeting and it is now waiting for any new announcement from the ECB about its plans details for buying these bonds in the future which is looking effecting negatively on the single currency again currently after the market had digested the news which could calm down the investors quickly focusing on the impacts of this announced package over the long term at the current low economic growth rates in the Euro zone which has risen by just .2% in the preliminary reading of the Q1 of this year which is not yet negatively impacted by the debt crisis and the requested austerity measures from IMF, the ECB and the European governments which will cap the governmental spending affecting negatively as well on the GDP of the EU countries which are actually struggling lagged behind US encouraging underpinning the greenback from another side.
After the strong opening of the single currency last week above 1.2875 which was its previous support of April 2009 getting momentum to continue its rally to reach 1.31 after the rescue package announcement before losing it falling back again below its psychological level at 1.3 in a continuous selling could break its recent low at 1.252 closing last week just above 1.233 which was the formed main bottom of October 2008 amid the credit crisis at 1.233 and by god's will, with the breaking of it yesterday, after inability to get back above 1.244, this can lead to 1.2 psychological level then the main support level of the pair at 1.16 whereas the pair has started its rally to 1.604 before falling to 1.233 and rising back forming a lower high at 1.515 in the beginning of last December.
The gold is still able to hold its gains above 1200$ as the market sentiment is still possessed by the debt crisis in the Euro zone and its consequences which can effect negatively on the growth outlook in the Euro area which is already struggling, the risk aversion could contain the market sentiment again pushing down the equities markets helping the gold to keep these gains as it is still the well-chosen option to the investors who are worried about the Swiss frank interventions and the instability in the bonds markets and the increased worries about its rewarding as a fixed income option currently because of the debt crisis in Europe and the slide of the EURO which can effect negatively on the Asian exports later and the growth outlook of them too encouraging the investors to wait and see for what can keep the value of their money amid the current low accommodative levels of interest rate across the broad which lowered the cost of borrowing from a side and the value of the currencies from another side and this is expected to hold further with the current market turmoil because of the crisis which can have further negative impacts in the future especially on the European consuming and investment spending which moving up its growth with an expected lowering of the governmental spending.
By God's will, we wait today for April US core CPI to be up monthly by .1% from a flat reading in March and yearly by 1% from 1.1% in March. We wait also for the broad figure to be up monthly by .1% again as March and yearly by 2.4% from 2.3% in March.
Walid Salah El Din