The greenback is still under pressure as the US stocks market could hold its gains yesterday. Dow could add 27 points more and S&P could close above 900 again up by .53% at 905 as the strong earning reports from Goldman Sacks and Intel could keep the investors' risk appetite increasing their hopes of recovery.
The single currency which is hurt by July Germane ZEW current industrial conditions exacerbating to -89.3 and they were waited to improve to -85.8 from -89.7 in June and the ZEW economic sentiment falling to 39.5 in this same month and it was expected to be 45.5 from 44.8 in June could break above 1.40 right now as the European stocks could follow the US green closing and the US stocks indexes future are up. S&P 500 future could get above 910 containing its pervious falling to 865 with the dovish opening of this week but it is still important for this rally to have further good news from Citigroup and BofA by the end of this week even if we are to meet a profit taken after this week rally but it can be short lived with no new serious threat of the investors' business confidence who are watching the banking sector results closely after the credit crisis. The greenback has been boosted in the beginning of the week by diminishing of the investors' risk appetite and cautiousness by the earning reports releases of the second quarter after dovish consuming data started with June US consumers confidence survey to 49.3 and it was expected to be 57 and ended last week with the release of US July consuming sentiment survey of University of Michigan preliminary reading which came down to 64.6 and it was expected to be 71 which have been read as a new wave of losing trust in the US waited recovery because of this credit crisis but Meredith Whitney who referred to buy Goldman sacks stocks which can go up from here 30% upgrading it to buy from neutral could push the investors to buy again at these low levels.
While Timothy Geithner is still in his tries to store the confidence in the US economy ability to recover but this time in Arabian Gulf countries, he has announced that US is still underpinning the greenback with change of this policy. Timothy promised that US would pursue policies for keeping the dollar's value yesterday. The gulf countries are holding a great deal of their reserves in the greenback and the US assets and debits and losing confidence in the US recovery can make them thinking in other options seriously which can threat the US creditability further. The recent US easing policy steps in the face of the credit crisis have had many criticisms from the holders of these USD back securities as they hurt the US treasuries attractivness which were the first option of the Fed's quantitive easing policy by offering an exchange of them by the mortgages back securities which caused the financial problem and became known as toxic assets which can poison the US creditability itself and they are still the Fed's preferred way to pump funds and easing by its adopted quantitive easing policy after losing the cutting interest rate tool to afford the required liquidity for the government to clean the banks balances sheets and to spur growth again to cover its debits.
Timothy has made a similar visit to china which criticized the world system based on the greenback recently in the G8 meeting for the same purpose but the position is different in these giant gulf countries as the US recovery is not only in need of liquidity and injecting funds which have inflationary bad recessionary effects but its in need of real demand to grow and until now this demand in US seems not enough to move the economy up from this point which can cause second round effects of this crisis and this demand can come from these countries which are remarked with a high income and a great deal of oil reserve which fortifies their prosperity in the times of growing too. So, from their side their holding of the greenback is a good hedge options at the time of recession and keeping their currencies based on the greenback is still a considerable option as the oil is still selling by this same currency.
From US side, it is important for the US to have a strong partnership with these countries which have the liquidity and oil which can bring them out of global crisis much stronger as US needs for a direct buying and holding of the US assets and indirect demand from these countries and even if it is not by the direct investing in US, it can be by sharing these countries inside growing projects which can operate US halted companies forces and add exterior demand to the US struggling economy as the liquidity is not enough if there is no a real demand and chances for growing and if this demand is not existing enough the liquidity can cause inflation pressure which can cap further the hope of the recovery and causes a stagflation inside the economy.
So, By God's Will, It is important today to watch the US inflation data of US of June as wait for US core CPI m/m to be up by .2% from .1% in May and yearly by 1.7% from 1.8% in May and the broad June CPI figure y/y to be down by 1.6% after falling in May by 1.3% and monthly by .5% from .1% in May. We wait also for July NY Fed manufacturing index to be -6 from -9.41 in June.