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The Current Market Sentiment

This article is from FX Consultant Walid Salah El Din, which mirrors my own personal views of the current market situation.

By God's will, we wait for the US fed's rate decision later this week. After last week surprising .75% interest rate cut, we want to listen to the fed's language to know how far they can go after this recent cut. The market is expecting further cuts but it is split between whether there is another cut or not this week.

The UK growth pace is expected to be negatively impacted too by the same crediting problems of US after the sub-prime mortgage undiminished problems and the increased probabilities of recession in US but it's became clear to the market that the inflation upside risks is to tackle the MPC following to the Fed's for spurring investment bringing back the risk appetite and trust in the equity markets.

The growth worries are looking softer in EU and the ECB ensured that they see this or want this! It is not clear yet! But the expectation of a hike later this year has diminished after the ECB member Mersch's comments that there are signs of growth weakness but the ECB has not discussed but 2 options not 3 which are a hike or a keep of the current interest rate but Last week disappointing 52.0 service PMI ensured that there actually signs of growth weakness amid uneased yet inflation risks and high energy and commodities prices can threat the price stability in EU.

the Japanese yen can keep gaining from this current interest rate outlook differential tightening, the mistrust in the stock market especially after the huge loss of citigroup 4th quarter amid the crediting problems and the increased expectations of a US recession can spread out especially, If the US growth could not get uses of the easing package of 150 Bln Bush's plan and the fed monetary easing.

By God's Will, The gold rates could keep its gains after the surprising .75% Fed's cut getting back above 900 again versus the greenback as the current market prospects of further interest rates cutting persisting offering much more funds to the credit and financial markets which can add to the gold value amid uneased oil and commodities prices. The recent US inflation rates have reached the fastest pace in over two years last November and were mild last December as Dec Core CPI came as expected .2% m/m and 2.4% y/y. the stagflation case is still possible which can add to the gold value too.