The greenback could begin the week strongly but it has come under pressure again with the market risk appetite rising weighing on the low yielding currencies such as The greenback and the Japanese yen which carries the investors' risks as the interest rate outlook of the greenback has improved with the last year ending while the market is waiting to have further rising of the ISM Manufacturing index of December from US today after the strong rising of Chicago December PMI to 60 which was waiting to be just 55.

By god's will, it looks that this new year should have changes of the central banks current monetary easing policies after reaching these current massive low interest rate levels with the credit crisis impact on the economy in the recent 2 years which can make changes in the currencies market by exchanging the lead of tightening between them. We have seen the unexpected labor data of November which have shown falling of the unemployment rate to 10% from 10.2% in October and losing of just 11k in US out of the farming sector and by the end of this week the market is focusing on the report of December to have a confirm of this improvement to add to the current growing speculations of a near coming tightening action in US as it is widely concluded that the Fed's governors will not change of their current quantitive easing policy without a crucial change in the labor market.

The British pound could get above 1.62 in very volatile market conditions in thin trading sessions by the year end after failing to break 1.58 and it is now still trying to break above 1.625 supported by UK December PMI which rose to 54.1 from 51.8 in November while the market was just waiting for 52. The cable has been hit recently by the surprising falling of November UK retail sales by 0.3% monthly which was opposing the market waiting for rising by .6% and yearly by 3.7% but they have risen yearly by just 3.1% which pushed it down breaking its major support versus the greenback at 1.61 before finding footing above 1.58 getting use of the current market optimism and the market believing in UK governmental promises of a close recovery this year as UK economy was the only economy in recession in the western Europe in the third quarter of last year.

Best wishes

FX Consultant
Walid Salah El Din

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