FX Commentary by Walid Salah El Din

The central banks in EU and UK are still stuck between stimulating the economy and fighting inflation. It the same situation in US the reports came mixed showing the need for holding for a while. Further cuts in US means further boost to the already boosted commodities prices. But the crediting problems head and the sub-prime issues have not ended and it can come up on the spot at any time among the concerns of slowing growth expectations.

We have seen and mentioned that the 2.6% y/y EU CPI could increased the market expectations of an Inflation pressure in Euro zone can force the ECB to open the door for further single currency appreciation amid these current high oil prices as the rate is away from the 2% ECB target. It is a similar case in UK too and both factors are helping their currencies appreciation for fighting inflation which is fueled by the energy and commodities prices as the interest rate outlook is still dovish anyway which supported the gold rates back above 800 again by the end of last week as the increased expectation of another interest rate cut by .25% by the end of the year.

Best wishes

FX Consultant

Walid Salah El Din