The shock which contained the market sentiment by the end of last week and the beginning of this week by the Hungarian government declaring that its debt position is exacerbating and exposed to default has eased today after they have said that they are to meet their budget deficit targets. the confidence could hardly come to the investors by the end of last week with no new bad news coming out from Europe but quickly with the bad news coming from Hungary this time the single currency has fallen across the broad as in spite of that it is out of the euro but the Euro zone is exposed to its debt and financial system which sparked the investors' worries about the spreading of the European debt crisis.
The single currency has recorded a new low in the Asian session at 1.1875 with no concerning comments about the value of the single currency and its recent massive falling from the G20 financial ministers meeting in South Korea during the weekend. The greenback and the Japanese yen were well-supported in the beginning of the week with the risk aversion containing the market sentiment. Dow is now struggling to get above 10.000 again while the single currency is trying to get above 1.20 again right now after the Hungarian try to calm down the markets today. The single currency was already under the pressure of the ECB report which has been released last week warning about the long term debt refinancing in Europe which look in need of 800 billion euros by the end of 2012 suggesting that the European banks are in need to be ready for facing bad loans following the debt crisis which can reach 123 billion euros for 2010 and 2011 to reach 105 for 2011 and for facing the bad loans from 2007 till 2009 they should put be ready with 238 billion euros. The financing problems are still looking ahead from the ECB report showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments which can transfer the problem to the balance sheet of the ECB threating the single currency.
The gold has eased last month from its all times high at 1249$ after the release of low inflation rates coming out from US showing that April US CPI core index which was expected to be 1%y/y from 1.1% in March and .1% m/m from 0% in March but it came at 1%y/y and 0% again monthly while the broad figure which was expected to be up yearly by 2.4% and monthly by .1% came at just 2.2% lower than march which was 2.3% yearly and - .1% m/m which could effect negatively on the gold value as a mirror of inflation lowering the market estimation of the inflation outlook upside risks however the gold could get back up as it is still the well-chosen option to the investors who are looking for the best safe haven with the current global missing trust in the bonds attractiveness and increased worries about its rewarding as a fixed income option to the investors who are looking for a saving option of their money value and that's rather than the increasing of the commodities and energy prices which are still pushed up by the current low accommodative levels of interest rate across the broad which is lowering the cost of borrowing from a side and the value of the currency from another side. The gold could creep up above 1200$ making a new high at 1249$ but with the oil falling below 80$ and the fed's repeated downplaying of the inflation upside risks, the gold has been dragged down finding support at 1156$ which has not been even tested this week making a higher low at 1166$ to creep up again above 1200$ trading above 1210$ currently while the gold main support level is still holding at 1124$ which was the bottom of the ascending wave to 1249$.
FX Consultant Walid Salah El Din