The covered bond auction of Portugal is still supporting the single currency to retrace some of its recent loses as it could find support at 1.297 as expected it was not easy to get down further breaking this supporting level from the first test of it. The single currency is still trying now to get above 1.32 versus the greenback again after the pressure on it has eased and the European equities markets have been cheered by this covered auction which brought some lost confidence to the investors to take risks selling back the greenback and the Japanese yen carrying new trades.
The market focusing currently is still on Portugal and Spain and the expected European requests for them to have shares of the available low cost bailing out package to fund their accumulated deficit which is weighing negatively on their creditability and the single currency domination which suffered strongly last month easing back from 1.4281 versus the greenback by the release of US non-farm payroll of October which has come better than expected adding 151k after losing 41k in September while the market was waiting for adding just 60k encouraging the investors to take profits covering their greenback selling as the Fed has actually taken its waited decision of adding another 600B$ to its adopted quantitive easing policy of buying US treasuries till the end of June 2011 but this was just a beginning as the greenback has continued its rising across the broad fueled by the market worries about the debt situation of the European countries again which increased in November containing the market sentiment weighing negatively on the single currency and the risk appetite of the investors which has been hurt again by the tension of the semi Korean island which tempered the markets pushing the inventors to square further their carry trades buying back the greenback and god willing, we wait again tomorrow for US non farm payroll release which is expected to be 145k from 151k in October and also we have tomorrow the US factory orders of October to get down by .7% after rising in September by 2.1% and US non-manufacturing indexes to be 54.7 from 54.3 in October
But today the market attention will be paid to the BOE to know whether or not it is to take further easing steps adding more funds to their current 200b Stg buying bonds or the MPC will be worried about the inflation upside risks outlook with UK CPI reading still above 3% yearly reaching 3.2% in October will cap them again from taking such steps especially after The National Institute of Economic and Social Research has expected UK GDP Q3 to be up by 0.5% q/q following the surprising preliminary reading quarterly reading at.8% while it was widely expected to be just .4% rising of Q2 by 0.8% and also we wait today for the ECB to have any new comments about the recent developments of the EU debt crisis or what can be done from their side to restore confidence in these debt ailing economies while the growing pace of Germany signals strong signs driving the EU economic growth up as we have seen recently the germane IFO historical recorded new high of November which has not been seen since the beginning of it in 1991 reaching 109.3 getting above October reading which was 107.7 and the germane retails sales figure of October rising up by 2.3% monthly while it was expected to be up by just 1.3% after falling in September by 1.8% which helped EU consumer confidence getting up to new 3 years high and lead November EU manufacturing PMI index to be above 55 again at 55.3 from 55.5 in October.
Best wishes
FX Consultant
Walid Salah El Din
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