Yesterday, The release of May US NAHB new home have increased to 16 from 14 in April showing an improving of the housing market in US. The figure was the best of this year which could help the stocks market to continue its rally yesterday but today the release of the US housing starts of April can weigh on the equity market performance and the risk appetite of the investors again as they slumped to 458k y/y and they were expected to be 520k from 530k in March. The building permits staged lower than .500M at .494M m/m and the market was waiting for improving to .530M from .510M came in March. The data show that the recovery is smooth and gradually and the consuming sentiment is still struggling.

This morning we have seen how the European equities market could follow the US bright closing yesterday and the encouraging release of the Germane ZEW which came in a promising optimistic way above the market expectations of 10 at 31.1 in May.

The release could support the single currency too driving it up above 1.36 but it could not hold its gains versus the greenback dragging lower than 1.36 with the US equity market trading in the negative territory right now.

The Japanese yen has suffered too from the optimistic market sentiment yesterday after a strong opening following last week dovish US closing of the stocks market. Both of the Japanese yen and the greenback are still well-used as funding currencies of the carry trades transactions because of their very low yielding across the broad and the key driving of the forex market is still the equity market change and The currencies market focusing on this property is still controlling the changes of it from the beginning of the credit crisis until now ignoring the suffering of the other lagged economies behind US. Last week, we have seen how far the EU economy is struggling behind US after the release of EU GDP Flash reading of the first quarter which reached 4.6% weighing on the single currency with beginning of this week too but the improving of the market risk appetite helped the market to shrug off these data selling the greenback versus it.

The stocks market have been underpinned by the market believes in the banking sectors abilities to recover and to pay back the US governmental funds sooner than later pushing the banks stocks pushed higher yesterday.

 

The Cable has found strong support recently from the improving of the market sentiment of holding assets and taking risk back again and the recent UK data of April which have shown the UK RICS house price index of April improving to -59.9 from -72.1 in March and the market was just waiting for -70 also the trade balance deficit has shrunk in March to 6.8 Billion pound from 7.3 Billon pound in Feb and also March UK manufacturing productions output have shrank by just .1% m/m and they were expected to be by -.9% m/m and UK industrial productions of March were expected to come down by .8 but they have shrank by slower pace by. -.6%.these data come after U.K. retail sales figure of British Retail Consortium survey of April which have surged by 4.6% in April y/y from declining in March by 1.2% and

 

UK retails sales prices index of April which was expected to get up to .2% m/m from a flat reading in March have increased by just .1% and UK CPI of April which was expected to go up to .4% m/m from .2% in March has come as the same as march .2% and the yearly figure came lower than the market expectations of  2.4% from 2.9% in March at 2.3% and the core excluding the food and the energy which was expected to be as the same as March at 1.7%m/m came lower than the market expectations at just 1.5%. The cable has been pushed above 1.53 on the recent pressure on the greenback but these weak inflation figures can put weights on it to continue today. The breaking of 1.5722 is now technically important for getting further momentum after making a new year high today at 1.5512.

 

Best wishes

 

FX Consultant

Walid Salah El Din

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