The risk aversion has contained the market sentiment today underpinning the Japanese yen and the greenback across the broad after the weak release of the germane IFO business climate figure which declined to 95.2 in February from 95.8 in January while the market was waiting for 96. the single currency which was trying to get above 1.37 versus the greenback has fallen below 1.36 with falling of US consumer confidence of February to 46 from 55.9 as the market was waiting for 56. The commodities and the energy prices have suffered too versus the greenback today with worries about the economic growth stability which triggered after the data from another side. The data was not encouraging as the weak consuming can has negative impact on other sectors and the labor market as well which is already suffering form a sluggish demand.
The market is waiting now for Ben Bernenke's semi annual testimony in front of the house later to find stronger language showing the reason of last week Fed's surprising decision of hiking the discount rate by .25% expressing this action which can increase the market speculation of another tightening actions to come which can underpin the greenback further. The Fed usually takes the discount rate decisions separately from its scheduled meeting in the critical times and it looks that the fed sees that the current economic conditions are not in need of keeping the discount rate unchanged at this very low level without any tightening action until now despite the Fed's Members trying to calm down the market after this decision repeating their mantra that the inflation pressure is still will contained and the economy is still not strong enough and in need of the current extraordinary low stimulus interest rates.
The massive falling of the single currency has shown today that the current market sentiment is still unable to get rid off the Greek debt and the worries about the other European countries sovereigns debt effecting negatively on the single currency which is trying hardly to stand again above 1.36 versus the greenback pushed up by increasing the investors' risk appetite last week sparked by strong earning reports from Barclays but the worries about the ability of Greek to sustain its debt at the current low levels of growth in the Euro zone has brought back bringing back to the market.
The required deficit to the growth ratio is below 3% while it's now above 12% in Greece which is not looking coming soon at the current struggling growth rates which resulted from the credit crisis as even the ECB could not stop any of its accommodative easing actions worrying about the current nascent recovery until now which can put more pressure on the reforming plans in Greece from another side as the forex market has got that there is no bailing out plans currently from the other EU member after the EU summit last Thursday and the EU Finanacial ministers meeting in the beginning of last week but just the political underpinning waiting for signs from Greece at least in the coming 30 days that there are effective efforts from its side can sustain its debt position but the most worrying thing is still that this same problem is threating other EU members like Spain and Portugal with no clear mechanism to the market for solving such economic situation in the case of exacerbation inside the Euro zone which can effect negatively on the single currency securities holding underpinning the risk aversion sentiment and the greenback from another side with these problems persisting.
The single currency which could close hardly last week above 1.36 could not break above 1.37 again today after making a new lower low at 1.3445 last Friday whereas the same bottom of last May. We have mentioned earlier that the pair can meet a support at this area in our previous reports which is still forming a support can be followed by 1.29 whereas the pair higher low of its rally reaching 1.513 in the beginning of last December while the next main resistance is still at 1.384 followed by 1.40 psychological level.
God Willing, it is still important to wait later next Friday for US Q4 Preliminary GDP reading to be 5.5% from 5.7% in the first reading and US February Chicago PMI which is expected to be 60 from 61.5 in January and also February University of Michigan Confidence final reading to be 74.3 from 74.4.
Walid Salah El Din