The currency market is still stagnant waiting for tomorrow's ECB and MPC meetings. The ECB is expected to leave the interest rate unchanged while the BOE is expected to cut interest rate by .25%. Yesterday decline of Mar Halifax m/m housing prices decline by 2.5% and UK completed mortgages declined to 49.200 by 3.5% in February. The housing figures show that the UK housing market is struggling behind the US housing market and crediting problems triggered by the sub prime mortgages bad loans. UK manufacturing increased 0.4% m/m and 1.9% yearly. Industrial production came also higher than expected by .3% and the market was expected a growing by just .2% monthly but the yearly figure came just as the market expectation of 1.3%. The data were not significant enough to move the British pound.
Even yesterday's release of the fed's minutes of its recent meeting when it lowered the interest rate by .75% versus market expectation of a higher a mount of cut did not change the market. They have mentioned that there is to be a contracting in the first half of this year and Ben Bernenke has mentioned this in his testimony last week. Surely Fisher the Fed member of Dallas and Plosser the Fed member of Philadelphia have shown their inflation concerns and how this massive cut can trigger inflation upside risks specially as the high oil and commodities prices.
The IMF downgraded the global growth. It expected the growth of US this year to be just .5% by the upcoming G7 meeting next Friday which is expected to discuss the current market turmoil and financial and crediting problems. Also it is expected to have an EU criticism of its appreciation as what's reported to be repeated that volatility in the forex market is undesirable and not good for stable growth and the Chinese Yuan is under valued and should reflect fundamentals and the Japanese yen fundamentals are better than what's pricing in the currency markets. The market is directionless currently by these events.
We wait today for Bernenke speech on Financial Literacy in Washington.
Best wishes
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Walid Salah El Din
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