The market was calm in the recent hours watching for the events in Libya and waiting for important data to come like today services data out as we wait for Feb EU Service index to be 57.2 and Feb UK service survey to be 54 from 54.5 in Jan following strong rising from 49.7 in December and also from US for Feb US ISM non-manufacturing index to be 59.9 from 59.4 in January while the market focusing will be by god's will on the release of US non-farm payroll of February by the end of the week to be 180k from just 36k in January after Feb US ADP Employment change of February came at 217k while the market was waiting for 184k from 187k in January and it is important too by the end of the week to wait too for US Factory orders of January to be up by 2.2% from just .2% in December.
After Dow had come under pressure losing 168 points in the previous session when the risk aversion came back containing the market sentiment because of the tension in Libya and the continuous rising of commodities and energy prices which forces Dow to close last week 260 points down after three consecutive weeks of gaining drove it up to 12391 which is the highest recorded high of this industrial index since credit crisis ending, The Dow could have a quit session closing 8 points up as Bernanke's testifies did not bring to the market what was not discounted referring to the Fed's existing worries about the jobs market and the need for supporting it and in the same time he has mentioned the negative impact of the commodities and oil prices rising which can tackle the Fed's easing steps and US recovery hoping that to be temporary and so there are investors' increased worries about cutting of the Fed's easing policy which can have negative impact on taking risk advantages weighing on the equities markets as the recent signs of pricing power in US which we have seen rising of US Philadelphia Fed Manufacturing price paid significantly 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 also 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.
The single currency is still underpinned by the markets expectations of having a closer interest rate hike by the ECB for tackling the prices upside risks ahead of its meeting later this week which can carry its first tightening action to the market since the credit crisis for containing the prices rising which can accumulate in Euro Zone in a fast way following UK and this was obvious recently from the ECB Member Mr. Mersch's warning about the inflation building pressure with the inflation well above the ECB target at 2% yearly.
The single currency is still facing resistance to get over its previous formed top at 1.386 after overcoming 1.374 versus the greenback and by god's will, this can open the way to 1.4 psychological level and getting over it can lead to 1.4281 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.
The gold is still getting use of the rising of oil prices after the better than expected release of Feb Chicago PMI which reached 71.2 and rising of Feb US ISM manufacturing Index 61.4 from 60.8 while the market was waiting for just 60.9 which increased the markets expectations of having stronger demand for energy from US and as a mirror of inflation, it could keep its place above its recent resistance at 1394$ and the psychological level at 1400$ which underpinned it technically to get over its recent resistance at the top which it has formed recently at 1423$ and breaking its recorded high at 1430$ recording another high at 1440$ as its properties as a safe haven with the tension in Lydia has no clear end and as hedge against inflation with the current rising of prices which are looking hard to be contained in the required pace in Europe, UK and also US which has started to have pricing power too while the Fed is still caring for helping the struggling labor and housing markets as we have seen in the recent statements of Bernenke hoping for containing the inflation upside risks over the long term with no clear statement about a possible action against the prices rising over the short term until now despite the current unrests in the Middle East countries over the short term which end in a country to start in another one threating the oil supplies from this strategic important area rich of oil pushing its prices up in a way can hurt the US growth which has been already revised down in its preliminary quarterly reading of the last quarter of 2011 to 2.8% from 3.2% in the advanced reading while it was expected to rise to 3.3%.
FX Market Strategist
Walid Salah El Din