By god's will, we are looking forward for the ECB interest rate decision later today. We expect it to come as widely expected with a cut by another .25% with an elevating of the current deflation risks with no additional untraditional easing steps following US and UK in their adopted quantitive easing policy.

The ECB has referred to the inflation pressure that can resulted from adopting this policy and in the same time Trichet has downplayed the deflation risks in the Euro zone over the medium term but it was the first time to the ECB to refer to this policy in its meeting which has been read as a smoothing to the market as they always do to avoid market shocks.

But the improvement of the current market sentiment and the financial market conditions can help saving these untraditional easing steps for a serious time as currently the market believe that the worst has become behind and the recovery will be gradually following US which lead the equities market in the recent 2 weeks to cover its loses of the beginning of this year which could underping the single currency recently after suffering from the low level of inflation and the increased probability of deflation which can enable ECB to cut the key interest rate in the eurozone further and taking untraditional easing stimulation steps forward in its current easing policy to spur the current cooled invetments by adopting the quatitive easing policy which can be by buying eurpean bonds for affording liquidity to the european governements to spend further and helping the ailing economy following US.

We have seen this week a slight improvement of The EU PMI manfacturing index of April to 36.8 from 36.7 in March and PMI Services index of April to 43.8 from 43.1 in March which refer to a samilar improving in EU following US but in a slower pace as US April ISM non-Manufacturing index has improved to 43.7 from 40.8 in March and better than the market expectations of 42.5 following April ISM Manufacturing index which came better than expected at 40.1

The optimisim in the equity market has come back yesterday after taking a a breath on Tuesday following the strong beginning of this week amid increased risk apitite contianing the current market sentiment beliving in a closer recovery can be later this year. Dow could get over 8500 closing at 8512. The currency market was little unfazed of these data waiting fo the ECB interest rate decision and April US labor report tomorrow which is expected to come with a fewer number of lost jobs than what was expected after the release of US April ADP changes which come at just -491k! following earlier Bernanke's testimony which referred to a gradual recovery and stablizing in the housing market and a current slower pace of contraction but if the US non-farm pay roll came worse than the earlier market consensus of -631k this can cause a problem to the recent equities markets rallies as the market is waiting to see even a softer pace of laying off  as the unemployment current pace can undermine the consuming sentiment which have improved recently as we have seen US April US Consumer Confidence index which was expected to go up to 29.5 from 26 in March coming better than expected at 39.2 following the preliminary release of April University of Michigan Confidence index which came better than the market expectations of 58.5 at 61.9 and the final reading came higher at 65.1 ensuring this improving by the end of last week.

Best wishes


FX Consultant

Walid Salah El Din
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