The market was stagnant taking no clear direction in the beginning of this week. The greenback is still keeping its recent gains across the broad.

The single currency is still suffering selling pressure after the recent dovish comments of Jean Cluade Trichet after the ECB decision to keep the interest rate unchanged at 4.25%. Trichet has highlighted the growth down side risks by a serious talking about the growth down side risks. In the same time he has tried to mention that the ECB recent decision to hike interest rate by .25% was important to avoid inflation second round effect and the ECB main job is to anchor inflation and to settle price stability over the medium term in the Euro zone. The single currency has tumbled across the broad aggressively. We wait this week for the flash release of EU August manufacturing PMI which is expected to be still under 50 level in the contracting territory at 47 and also EU services PMI flash release which is expected to be 48.

The cable was recently negatively impacted by the dovish BOE quarterly inflation report which expected the inflation to come down again near 2% in the coming 2 years but the bank did not deny the current upside inflation risks in this same time of down side growth risks which cause a stagflation case in UK. The report came accompanied with the release of UK labor report which has shown an increase of the unemployment rate to 5.4% in June from 5.3% in May and an unexpected increase of the UK Jobs claimant of July to 20.1k from 15.5k in June and the market was expecting 17.5%. It is important to wait for this week release of the recent MPC minutes of its recent meeting which kept the interest rate unchanged at 5%. There can be a stronger direction for easing again after the recent these recent data and the current decline of the commodities and oil prices which are trading just above 110$ a barrel. Also we have the release of UK July retail sales which are expected to increase by 1.7% yearly and to decrease by .3% monthly and the release of UK Q2 GDP which is expected to be .1% q/q and 1.5% y/y from .2% m/m and 1.6% y/y in the first quarter.

It is important to wait this week for the release of important housing data from US. We have today August NAHB Housing Market Index which is expected to be 16 as the same as last month and tomorrow we have the release of July US housing starts which are expected to be 960k and building permits which are expected to be 980k.

Best wishes

FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
http://www.fx-recommends.com