The Current Market Sentiment

Apr. 11. 2025 – Gold and Equities, amid the current running “Tariffs Auctions”

mail@fx-recommends.com (Walid Salah El Din) — Sat, 12 Apr 2025 02:22:00 +0000

Actually, I do not want to go far deeper into the current trade war details, nor the running “Tariffs Auction” between US and China “34%, 104%, 125% … or whatever it can ends to.

But let’s talk about the trading ideas and what we can base on to trade, as an useful outcome of these arrogance war issues unfazing of the global economic outlook and the current stagflation materializing.

We need to know that it is become clear that we are ahead of higher prices and lower economic activity persistence in US and this is a favorable atmosphere for Gold as a hedge against inflation and safe haven option in the same time with difficulty to have higher interest rate to contain the inflation upside risks or lower rate to stimulate growth in US.

We have seen also that US President Donald Trump is now able to fire members of independent agencies, after April 9 when US Supreme Court Chief Justice John Roberts allowed him to that “temporarily”.

Trump may not exercise that option currently, but he can press further to cut rates next FOMC’s members meeting in May and that can happen. It was lonely enough reason why the gold could make such recent quick rebounding.

While the inflation pressure is looking coming down by a faster way currently as we had seen US CPI coming yesterday lower than expected at 2.6 yearly and also March US PPI coming also lower than expected at 2.7% year on year.

The current money flows stance is also good for boosting demand for gold, amid the current great deal of uncertainty, while the investors are seeking for a stable financial instrument and downloading risks.

While Equities are depressed by unknown future, while the current running volatility appears only good opportunity for hot money to trade not economical to last for long term.

Anyways, Trump’s setback was good and important for the equities rebounding we have seen this week as the cost of returning can go higher and higher without that rapid response to give let for 90 days for unretaliating countries within the past 2 days before that setback!!

We could see the market later between optimism driving equities up, as there can be opportunities for reaching real deals and worries about recession from the other side on stagflation fear because of the higher imported prices with no available substitution in US meanwhile can make the inflation rising transitory or even by smooth way, amid the current running “Tariffs Auction” among US and its trade partners!

The former Fed’s Chief Yellen has criticized aggressively the new adopted economic policy of Trump yesterday in here meeting with CNN and surely, if the older former Fed’s Chief Alan Greenspan had been asked about the current running war, he will answer by the same massage mantra he was giving during his testifies before the house financial committee and senate banking committee that this is working in benefits of the American people prosperity with the strong dollar policy.

Anyways, there was a well-known growing trade deficit between the 2 countries in the benefit of China which was loading UST in the same time making it overall looking as US buys from it on account and that’s it. It was better in hand of US than what it is facing right now and what it could face in the future of setbacks by God’s will.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

30th January 2025 – Who assesses whom?!

mail@fx-recommends.com (Walid Salah El Din) — Thu, 30 Jan 2025 04:37:00 +0000

After Trump repeated his calling for lower interest rates in Davos, The Fed as expected kept its FFTR unchanged between 4.25% and 4.50%, after cutting rates by 1% from last Sep. 18 to Dec. 18 on progress in achieving its inflation 2% yearly goal and for supporting the labor market.

The committee members voted unanimously to keep the Fed Fund rate unchanged showing conventional readiness to wait further for more clues about inflation and labor market.

The committee underscored that the economic activity is still growing by solid pace driving GDP rate well above 2% in 2024, the labor market stabilizing at low levels of unemployment, without wages inflation pressure adding significantly to the inflation which is still elevated above its 2% yearly target, as PCE broad figure rose by 2.6% in December and its core increased by 2.8% yearly.

Following last Dec. 18 meeting, the Fed justified its last cutting action saying in its statement that inflation had made progress toward its 2% target, but it returned following January meeting to state that the pace of price remains elevated highlighting the need to pause now waiting for more to indicate its outlook.

The committee statement assured again on that there is no preset course of interest rate, it will keep following the incoming data and it is well-positioned to take what is suitable of decisions for achieving its mandate of reaching price stability and maximum employment.

After questions about the conflict that could be between the monetary policy and the fiscal policy which contained the market sentiment recently and added uncertainty about the interest rate outlook, The Fed’s Chairman Jerome Powell who had several confrontations versus Trump in his first Era avoided provoking him by criticizing any of his fiscal policies impact on inflation or on the economic activity.

He assured repeatedly on The Fed’s mandate and commitment to have price stability and reaching maximum possible employment level avoiding talking directly about the well-known limited power on the Fed by the white house.

In the same time, he highlighted that the committee members unanimously decided to not be hurry in cutting the interest rate from the current level preferring observing what can the new fiscal and migration policies can lead to of data to move the Fed.

He tried to show that the Fed is doing only what is needed for achieving its mandate without mentioning the option of tightening.

He said that there was now direct contact between him and the president yet and he did not talk about the Fed’s independency.

But we have to mention here that it is still unknown yet the impact of these planned imposed tariffs by Trump’s administration on the economic activity and the inflation outlook, while it became obvious that executing his immigration tightening policies can have negative impact on the economic activity and specially the agriculture sector.

As there are currently 8.3m undocumented working immigrants in US, forming 5.2 of the labor force as “center for migrations studies” CMS said.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

16th August 2024 – The brought back trust in the US economy could drive the risk appetite higher

mail@fx-recommends.com (Walid Salah El Din) — Fri, 16 Aug 2024 02:48:00 +0000

New week of lower demands for jobless benefits and higher than expected retail sales in July in US could help the investors to load back more risky assets sending Dow Jones Future Index higher, after the turmoil which havocked the equities markets, following the release of July US Labor report a week ago.

Even without new Fed’s hawkish comments, the data were enough to bring back the trust in the US economy which has grown initially by 2.8% in the second quarter, after growth by half of this percentage in the first quarter, showing resilience of the US economy with the current Fed’s restrictive stance to contain inflation.

The Initial Jobless Claims for the week ending on Aug. 10 came down for the second week in row to 227K, while the consensus was referring to retreating to 235K only from 234K a week earlier.

July Retail sales increased monthly by 1% monthly, after retreating by 0.2% in June, while the consensus was referring to rising by only 0.3% and by excluding the autos sales, the figure rose by 0.4%, which the median forecast was pointing to rising by only 0.1%.

The import prices and the exports prices have shown also higher than expected imported inflation and generated inflation of the US economy to the others in July.

July Export prices rose monthly by 0.7%, while the consensus was referring to no change, after declining by 0.3% in June, as the import price rose by 0.1%, while the forecast was referring to retreating by 0.1%, after no change in June.

Dow Jones Future Index could easily surpass 40k psychological level and has fo0ting above it before ending the session at the top of it in another bullish sign.

USD could score gains against its main rival currencies coming closer to 150 psychological level against the Japanese yen again driving Nikkei 225 future rates higher with new wave of loading back risks.

While EUR/USD was falling below 1.10 psychological level too to be traded currently near 1.096, while GBP/USD could gain back all what it lost, as it was still unpinned by stronger than expected manufacturing and industrial productions in June as we have seen earlier to be traded currently near 1.286.

The next main event of this month is expected to be Jackson Hole Symposium, with all eyes are on the monetary policies outlook to detect any change of the Governors’ policies who are to meet after nearly a week from now by God’s will, as Fed is shifting to easing.

While BOJ is shifting to tightening, raising until now the short-term policy rate to 0.15%, stating tapering of its JGB QE monthly purchases to about 3tr yen into the January to March 2026 quarter.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

21st August 2023 – The focusing is rising on the money markets by Jackson Hole Symposium

mail@fx-recommends.com (Walid Salah El Din) — Mon, 21 Aug 2023 04:40:00 +0000

PBOC decided in the beginning of the new week to resume its easing track lowering its yearly (LPR) by 0.1%, while the consensus was referring to 0.15% to be now 3.45% keeping in the same time its (LPR) unchanged at 4.20%.

The decision comes, after PBOC indicated during the weekend that “China will co-ordinate to give the suitable financial support to resolve the local government debt problems which can result from the real states sector problems”

Amid rising concerns about this sector, after China’s property giant Evergrande filed for bankruptcy protection in Manhattan court.

this most indebt company in this sector by $330b has started actually to miss payments of at its maturity by the end of 2021 sparking worries about the future of the real state sector in China, before stopping its stock trading in march 2021. The company which scored $81b gross loss of 2021 and 2022 has wide ties in the Chinese real state sector and across the broad surely it is not the only insolvent one in Chinese real state sector.

The spillover impact from the Chinese real state sector to its banking sector raised the doubts about the Chinese growth outlook and the governmental debt as well. While the concerns are rising about the governmental action to afford enough liquidity to sustain the banking sector which is required by the government to lend more by lower costs.

PBOC said that "The financial support to the real economy must be strong enough", while the major banks should increase their lending, after joint meeting between PBOC’s members with the Chinese financial regulator and the securities regulator last week.

There is a higher probability meanwhile of selling some of its UST holding or at least cutting of its gold buying scale to afford this money, after its increased its holding of Gold to 2113.46 tons in the second quarter of 2023 from 2068.36 in the first quarter of 2023

While it is trying to stimulate the economy to drive down the youth unemployment rate which reached 21.3 percent last June and solve the problems of the real state sector which accounts for about 30% of the Chinese economy by the lowest possible cost, After the problem became in the markets focus in the recent weeks which has actually lived in worries about rising yields in the US secondary money markets.

While Moody’s decisions to downgrade U.S. credit rating from AAA to AA+ and cut the credit ratings of 10 small and midsized U.S. banks are still in mind.

The gold which came under pressure by rising yields in the US secondary market dropped further below 1885$ per ounce, after PBOC’s easing action today, while UST 10yr yield rose to 4.288%, after it started the week just below 4.26%.

While the inflation is looking gathering momentum in Japan, amid higher growth rates reached 6% in the second quarter of this year, doubling the median market forecast and the rising demands for higher wages, even from the Japanese welfare ministry, the pressure on BOJ increases to take stronger tightening action, after it has already shown shifting to more flexibility in controlling its YCC policy, after BOJ’s member recent meeting.

These events came to contain the market sentiment adding more focus on the secondary money market just before Jackson symposium, whereas many of high-class monetary policies decision makers are set to meet by the end of this week.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

20th March 2023 – What the Fed can do next to protect the US banking system

mail@fx-recommends.com (Walid Salah El Din) — Mon, 20 Mar 2023 05:10:00 +0000

20th March 2023 – What the Fed can do next to protect the US banking system

God willing, We are ahead of next for awaited meeting of the FOMC member this week, after increasing worries about the banking sector efficiency in US, after the vcb’s collapse, assuming deposits of Signature Bridge Bank by a subsidiary of New York Community Bancorporation to prop it up and the First Republic rescue plan worth $30b by a group of 11 giant banks could not hold S&P back from downgrading it deeper into junk territory to “B-plus” from “A-minus” saying that it is still in sack of liquidity.

The worry was not about a failure of a bank, 2 or more, but the reason why we see that fallout. As vcb’s assets structure of holding a great ample of low yielding UST is not something special for it, but it’s widely in use of the investment vehicle of major banks in US and even out of it.

While they are watching rising of UST yields in the secondary money markets on the Fed’s current adopted tightening policy to contain inflation with no action, making their profitability lagged behind the yield curve of their holding of UST and in exposure to fallout short of liquidity can drive them to the money market to book losses.

While the recent inflation data from US were suggesting moving of Fed fund rate up by 50 basis point more, as what Fed’s Chief Jerome Powell has been figured out during his recent testimony to the senate banking affairs committee earlier this month, before the crisis of svb, expecting holding rates high for longer time to contain the inflation upside risks in US.

But now after these looming financial risks, the odds of watching 50 basis hiking this week diminished and the probability of holding rates unchanged increased but the most expected is still tightening by 0.25% for curbing inflation.

Surely, the new quarterly announced projections of the interest rate by FOMC’s members will be closely watched to know their will and also their evaluation of the inflation, the growth and the unemployment rate next.

Until now, The Fed is looking aware of the problem and eager to work on it with the treasury and other counterparts opening swaps window with other 5 major central banks to infuse USD liquidity.

But what can they do next;

- The FOMC can lower the interest rate to lower the pressure on the banking sector generally and to reduce the probability of watching further fallout. But that is hard to bring back the trust in the financial market and the banking sector as no sign of inflation setting back or even looming recession risks yet. While the Fed fund rate is now close to 5%, after tsunami of hiking by the Fed hit the banking sector which lived for relatively long period of holding rates it near zero.

- The Fed can show also trust in the banking the sector and economic performance and choose to tighten by another 0.25% to fight inflation and this is also respectful choice as it shows also that it is well-contained problem.

- The Fed can choose to provide relatively low yielding loans for the banking sector grunted by the banks holding of US Treasuries as a Collateral on their maturities to smooth the pressure on them. This action can support them directly to face the crisis and that is my view and it can be taken with other easing steps, if the pressure on the Fed accumulates and it can be also with the Fed’s current adopted policy to fight inflation.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

1st Feb 2022 – It is not 100% priced in Fed’s decision this time.

mail@fx-recommends.com (Walid Salah El Din) — Wed, 01 Feb 2023 05:53:00 +0000

1st Feb 2022 – It is not 100% priced in Fed’s decision this time.

We are ahead of new Interest rate decision in US and it not 100% priced in. Before the silence of the FOMC members, we had seen St. Louis Federal Reserve's President James Bullard saying that US interest rates have to rise further to ensure that inflationary pressures recede. I think is going to vote for 0.50% and he is well known as a hawkish member anyways.

While the FOMC member through 2030 Cristopher Waller said it frankly last Jan 20 before the silence that he backs 0.25% hike this meeting.

The others can be named in between like Fed's Loretta Mester, president of the Federal Reserve Bank of Cleveland who welcomed actions to tame inflation. She said previously that her estimate for interest rates is higher than that of her colleagues and the central bank needs sustained tight policy to defeat inflation.

While Fed's Esther George said that the central bank must restore price stability, "which means returning to 2% inflation rising yearly scale" expecting Fed Fund rate to rise to 5%. It is the same as the median forecast of the members have actually shown.

Another FOMC member who is The Minneapolis Fed’s Neel Kashkari also noted before the silence that he wants to be sure that inflation has stopped rising, before he would support stopping of tightening.

While the Fed chairman indicated just before the committee members' usual two-week silence before the meeting that "smaller interest rate increases are likely to begin in the near future and if progress in tackling inflation is still seen so far, we still have a way to restore price stability."

Powell said that There is no talk among the members about the possibility of lowering interest rates before having evidence of inflation setting back to its 2% yearly inflation target over the medium term.

So, there are no current plans to do to cut rates before the end of 2023, although it was expected that inflation rates would drop, before the middle of 2023, mainly as a result of the decline in demand within the real estate sector, due to the taken tightening steps by the Federal Reserve.

Powell expects economic growth to decline below its usual rates in the medium term in the coming period, after it has already declined significantly in 2022 from 2021, and he also made it clear that the committee expects pressure on the labor market during the coming period as a result of efforts to contain inflation, but he avoided calling it “a recession or fabricating a recession” to disrupt economic activity in order to contain inflation.

Powell stated again, as he did after the last meetings, that "no one knows whether these efforts will lead to a recession or not, just as no one knows to what extent this recession will be, if it is to be.

But the most important now is to contain inflation," and the level or interest rate that we will to reach this goal, not the rate of lifting pace that we will follow in doing this task.

So that the monetary policy will become tighter and tighter enough to contain inflation, as the Fed sees even for having it considerably tight for long time to contain the inflation.

The minutes of last meeting last December have generally highlighted that the committee members maintained their hawkish stance and referred to more hikes to come ahead.

The last FOMC members’ meeting statement showed also willingness to slow down the economic activities to contain inflation, despite its expectation of watching declining in the performance of the labor market, which is still performing very well.

As the median quarterly published forecast of the members highlighted again their expectation of having higher inflation pressure and their readiness to send rates higher to fight this pressure, despite the growth downside pressure and the higher unemployment rate which can result from that fight.

As The FOMC members' average forecast were as follows:

For growth:

0.5% for 2022, 0.5% for 2023, 1.6% for 2024, 1.8% for 2025, from 0.2% in 2022, 1.2% in 2023, 1.7% for 2024 and 1.8% for 2025 the members had expected in last September.

For the unemployment rate:

3.7% for 2022, 4.6% for 2023, 4.6% for 2024, 4.5% for 2025, from 3.8% for 2022, 4.4% for 2023, 4.4% for 2024, and 4.3% for 2025 the members expected last September.

For inflation, the average expectation of the committee members regarding the price index of personal expenditure on consumption was as follows:

5.6% for 2022, 3.1% for 2023, 2.5% for 2024 and 2.1% for 2025, from 5.4% in 2022, 2.8% for 2023, 2.3% for 2024 and 2% for 2025 the members expected in last September.

Excluding food and energy prices from the index, the average expectations of members are as follows:

4.8% for 2022, 3.5% for 2023, 2.5% for 2024 and 2.1% for 2025, from 4.5% for 2022, 3.1% for 2023, 2.3% for 2024 and 2.1% for 2025 the members expected in last September.

For interest rates, the average expectations of the members were as follows:

4.4% for 2022 end, 5.1% for 2023 end, 4.1% for 2024 end, 3.1% for 2025 end, from 4.4% for 2022, 4.6% for 2023, 3.9% for 2024, and 2.9% for 2025 the members expected last September.

But after continued easing of the inflation pressure in the recent months, the market became priced in nearly 80% on tightening by only 0.25%.

From the other side of the Atlantic, we have seen also chorus of tightening promises to contain Inflation in EU too.

As ECB Governing Council member Olli Rehn said recently that rates will have to rise significantly in the next couple of meetings to dampen inflation and also ECB member Pablo Hernandez indicated that they will need to continue hiking the interest rates at a steady pace to anchor the upside risk of inflation expectation.

Have a good day

Global Market Strategist
Walid Salah El Din

14th Oct 2022 – It is not OPEC you know; “It is OPEC+”

mail@fx-recommends.com (Walid Salah El Din) — Fri, 14 Oct 2022 15:16:00 +0000

14th Oct 2022 – It is not OPEC you know; “It is OPEC+”

After it could reach 93.7$ on OPEC+’s cut by 2m bpd, WTI came again under pressure trading now near 86$ on continued worries about the global economic outlook and the demand for oil.

While the Fed is still appearing on its same track of tightening for fighting the inflation persistence.

As what we could see from Sep US CPI core rising by 6.6% showing wider range of inflation upside risks not only the broad figure of it which came again higher than expected recording 8.2% year on year in September, while the consensus was referring this time to 8.1%, after rising by 8.3% in August.

The criticized decision of OPEC+ by US has been met by Biden’s decision to release another 10m barrel in November of its inventory which is at its lowest levels since 1984, making any new decision of that type much more difficult and giving it less options to help others outside US in Europe.

Biden’s administration decision was expected to replace its current working decision which has been taken last March to release 1m barrel a day of its inventory daily for 6 months starting from the beginning of last May and now we are getting closer to the end of its act.

While the US inventory rising itself is historically important element for curbing the prices and now, we are ahead of new congressional elections next month can tend to the republican party.

As this administration failed to push the US energy companies to increase their production and raise the number of their working rigs, asking uselessly in the same time for production rising from OPEC+!

OPEC+ which is to be backed by Russian existence in it till the end of 2023 is looking now stronger and more liberal in taking their decisions than before, when OPEC was carrying most of the global economic recovery costs by enduring Oil prices at 30s or may be lower below the cost of producing to boost economic demand for recovery can later help the prices.

Now it is not looking the same cycle we used to see, as the energy minister of Saudi Arabia the prince Abdelaziz bin Salman said last August within WTI slide to 80s Area by direct and clear way that these prices do not reflect the market fundamentals, after the Ukrainian crisis and the group will look into cutting production in September and they did by 100k initially in September meeting.

As WTI 80s area vulnerability threaten the fiscal situation of many OPEC+ members such as Saudi Arabia which has built its new budget on 76$ per barrel which is nearly 8 dollars below WTI prices.

After they were raising the production monthly by 400k per day since the beginning of August 2021 and later in last June, it had decided to raise by 432k, before adding 648k in last July and also in August, while the final adding was by 100k last September, before starting the cutting by rolling back this 100k from the beginning of this October.

The group which could not even reach that wanted level of production of September is now required to lower its production by 2m bpd “1.273m of them from OPEC and 727k from the rest of OPEC+” from last August 43.856m bpd produced level.

So, the decision looks surely good for that members which could not even reach their quota production in the recent months and on the top of these members certainly Russia which is required to produce from the beginning of November 10.478m bpd down from its 11.004m production roof, while it could not produce more than 9.77 last September.

While more than half of that 2m bpd cut will be done by Saudi Arabia, Iraq, Kuwait and Emirates.

Tangibly, OPEC+ added 170k last September but the gap between quotas and the production was as the same as August at 3.6m bpd.

The next ministerial meeting of OPEC+ will be next Dec. 4 and surely in will be closely watched by God’s will.

Kind Regards

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: Chief.economist@hotmail.com

3rd Oct 2022 – OPEC+ Mulls large cuts to tell that it is not the prices cycle you used to see

mail@fx-recommends.com (Walid Salah El Din) — Mon, 03 Oct 2022 00:06:00 +0000

3rd Oct 2022 – OPEC+ Mulls large cuts to tell that it is not the prices cycle you used to see

Oil prices opened the first session of this new month and quarter on upside gaps, before adding more gains during this session on rumors about OPEC+ mulling of new oil production cut can reach 1m bpd, after last month first cutting decision since Covid-19 crisis by only 100k has started to be in act from the beginning this month.

OPEC+ which is much more backed by conviction with Russia than OPEC is looking now stronger and more liberal in taking their decisions than before, when it was carrying most of the global economic recovery costs by enduring Oil prices at 30s or may be lower below the cost of producing to boost economic demand for recovery can later help the prices.

Now, it is not looking the same cycle we used to see, as the energy minister of Saudi Arabia the prince Abdelaziz bin Salman said last August within WTI slide to 80s Area by direct and clear way that these prices do not reflect the market fundamentals, after the Ukrainian crisis and the group will look into cutting production in September and they did by 100k initially in September meeting.

After they were raising the production monthly by 400k per day since the beginning of August 2021 reaching their maximum known capacity under continued pressure from Europe and Biden’s administration which decided to anchor the prices by releasing 1m of its inventory daily for 6 months from the beginning of last May and now we are nearly only one month ahead before the end of this period with no new signal about new oil offering from US.

While the Fed is still keeping playing its role in containing the inflation pressure by raising rates showing higher readiness to recession, as you could listened recently from Fed officials.

Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.

Fed’s Charles Evans said he was getting concerned about going too far, too fast with rate hikes but it is in line with his expectation of reaching 4.50% at the end of 2022.

Neel Kashkari said the central bank is moving “very aggressively” and that there is a high risk of “overdoing it.”

Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”.

While The Fed’s Chief Powell’s comments are still getting hawkish and hawkish just shy of saying that we accept the recession as a price of containing inflation and we work our policy for cooling down the economic as much as we can meanwhile.

But the FOMC’s members’ last released forecasts could say that by much clearer way, when they raised their forecasts of Fed the Fund rates further with the unemployment rate and both of PCE and Core PCE, lowering their growth forecast than they did last June adding strength to the Greenback and woes to the US equities.

Have a good day

Kind Regards

Global Market Strategist

Walid Salah El Din

20th October 2021 – US equities living with higher inflation and higher interest rates

mail@fx-recommends.com (Walid Salah El Din) — Wed, 20 Oct 2021 03:21:00 +0000

The US equities market is still possessed by Q3 robusting earning but this earning was on peak of inflation yearly rates, threatening the demand and alarming of close by tightening action to curb inflation and boost cost of borrowing by USD.

As what has been mentioned recently by the Fed’s vice president Richard Clarida who see that Fed’s reached more than its goals in the labor market and over inflation levels.

Federal Reserve Chair Jerome Powell in his most recent testify before the senate banking committee has shown that we are still having work to do to reach the maximum possible level in the labor market but we are in much more difficult situation right now as the inflation is growing by faster than expected pace and in need to be contained.

The FOMC members have highlighted last September their knowledge of much higher inflation pressure and lower growth rate to come next and they are looking more eager to handle the economic cycle from here, before watching shocking demand figures.

The committee members expected the economic growth to be this year at 5.9%, down from 7.0% in the June and their preferred gauge of inflation “Personal Consumption Prices” to be at 4.2% for 2021, up from 3.4% they expected in June raising also their forecast of Core PCE for the year to 3.7% from 3.0% lowering their, unemployment rate prediction to be at 4.8% at the end of this year from 4.5% they were foreseen in June.

The committee members meeting minutes of Sep. 21 and 22 have shown that the members’ discussions reached advanced point to taper Fed’s QE by $15b by the end of the year and that can be at the middle of November or December of the running $120b monthly scale which widened US balance sheet to reach $8.480tr on this Oct. 11.

Goldman Sachs lowered also its forecast for this year economic growth to 5.6% from 5.7% it was expecting previously and for 2022 it is expecting now 4% annual growth rate from 4.4% it was seen previously and amid the current supply chains shortages which affects negatively on the global growth many companies are expecting now lower earning for fourth quarter, as producing new products at the current prices raised the worries about the demand for them.

We have seen also at the beginning of the week the Chinese annual growth rate release of Q3 coming at 4.9% well below the median forecast which was referring to 5.2% expansion following growth by 7.9% in the second quarter.

The Chinese industrial production at this level of prices and lake of supplies rose by only 3.1% yearly in September, while the market was waiting for increasing by 4.5%, after rising by 5.3% in August.

But the demand for consuming was still running well above as the retails sales rose by 4.4% in September, while the consensus was pointing to rising by only 3.3%, after increasing by 2.5% in August, showing that the demand is still leading at the current prices and no divergence to the downside yet.

We have seen also by the end of last week Sep US retails sales rising by 0.7%m/m, while the consensus was referring to declining by 0.2%, following increasing in August by 0.9%. The release could calm down the markets which were worried about the consuming spending at these levels of prices, as this spending forms 70% of US growth rate.

In response to the crisis, the Fed has managed in March of last year to widen its balance sheet initially by USD2.3tr, before driving it to surpass in May USD7tr level reaching the current unprecedented levels above USD8tr to the support the small businesses and weigh down on the cost of borrowing for supporting the economy and for the US government which is always in need for lower UST yields to pay to have lighter financial burden it carries in the current prolonged debt passage which is need to be lifted again by next Nov. 3.

The US treasuries has got debt ceiling boost permission to borrow $480b more and they are expected to run out, before that date and it has previously passed CARES Act USD2tr driving the annual deficit for FY2020 to unprecedented level reaching $3.1tr with nearly USD20.9tr GDP hurting the creditability of US which is looking to struggle harder to have faster growth rates ahead amid the current prices.

While The markets are still looking forward for another substantial relief package spending for infrastructure, health care and education.

The US economy has already got boosts by several reflation plans also during Trump's era which watched also threats to the global economy because of his trade wars which drove the Fed to lower the Fed fund rate three times by 0.25% in the period from Jul. 31 to Oct. 31, 2019.

The Fed is now criticized by fueling assets bubble and contributing in using of higher rates of leverage in the equities market during The Fed’s Chief Gerome Powell’s era which should not be extended as many Senators ask for now.

But Powell does not deny this fueling and he always refers to that the Fed is only one element among others like the fiscal stimulating policies and the supply chains weak stance, following propping the economy up from the bottleneck.

While this artificial inflation fueling is one of the main reasons why we see the US equities indexes at these levels reflecting higher assets values more than reflecting the companies’ activities profitability.

Now, the Fed is looking willing ahead to curb that bubble letting the yield curves rising, while we are ahead of facing higher yearly inflation in the winter fueled by high energy prices.

But anyway, the situation is now completely different thanks to the central banks easing efforts and the governments reflation plans and the current existence of vaccine against Covid-19 and Fed’s tightening action next became fully priced in the markets right now and it is just the pace act of doing to be figure out next by God’s will.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

8th June 2021 – Fed’s step forward, Fed’s step back

mail@fx-recommends.com (Walid Salah El Din) — Tue, 08 Jun 2021 02:32:00 +0000

Fed - Labor - Inflation - Fed

The Fed’s still stray between curbing the prices and the labor market needs for cheap money.

We have seen the May US labor report showing adding of only 559k out of the farming sector, with average earning per hour rising by 2% year on year, while the consensus was referring to falling by 0.4%, after rising in April by 0.3% has been revised up to 0.4%.

The report was shocking as it came, after US ADP had shown adding of 978k in May and also, after five consecutive slides of US jobless claims ended to 385k in the week ending of 28^th of last May and even the consensus was referring to adding of 650k.

May US ISM Manufacturing indexes have also highlighted that issue clearly by showing retreating of the employment index to 50.9 from 55.1 in April and barely setback of the prices paid index to 88 from all times high in April at 89.6.

Needed Reflation

Even over the financial stance, Yellen said during the week end US President Joe Biden’s $4 trillion spending plans are needed even if it means higher inflation and interest rates.

Here comment came after passing 15% corporate taxes conviction among the G7 finance ministers in UK, while Biden was pushing for 21%.

Facebook welcomed the step by intelligent announcement in time before the market opening to close the door against the speculations of capitals moving outside US to offshore taxes havens countries and to avert a slide of its share on the back of that decision.

Unchanged ECB’s stance awaited

In EU, we wait next Thursday for another ECB’s governing council meeting and it is expected to end to keeping of the main refinancing rate at zero, the marginal lending facility at 0.25% and the deposit rate at -0.5% with extending the Pandemic Emergency Purchase Program (PEPP) to March 2022, totaling €1.85tr for purchasing the issued bonds by the EU governments which are in strong sake of lower money costs to finance their needed reflation plans to boost the economy.

No expected criticism against the EUR’s appreciation which is working meanwhile to contain inflation in EU, not as the stance was in the beginning of the year, when EURUSD reached 1.2349 and has been faced by vocal interventions by several ECB members.

No expected considerable reference to CPI rising to the ECB’s yearly target over the medium term at 2% as it’s flash reading has shown or even reference transitory inflation rising as what’s running currently in US on last year economic paralysis to the contain the virous infection which pushes up the current inflation yearly figures sky high.

Inflation-Growth neck to neck

As we are waiting ahead next Thursday also for May CPI figure of US which is expected to show rising by 4.7% y/y, after rising by 4.2% in April, reflecting the change between the current prices and the prices nearly a year ago, when WTI was close to 15$ per barrel.

1: Thanks to the relatively fast vaccination pace in US.

2: Thanks to the US governments consecutive reflation plans which drove the US debt level to unprecedented level at USD28.3tr currently and US Debt to GDP ratio to 127.7% at the end of 2020 third quarter, hurting the creditability of US “which has been lowered during Obama’s Era by S&P from AAA top tier to AA+ but now after Covid-19”, it’s OK”, while it is still struggling to have faster growth rates and to restore nearly 7.5m jobs “out of the farming sector since last February” to the labor market.

The US economy has already got boosts by several reflation plans valued more than USD1.5tr, before the virus crisis, during Trump's era which watched also threats to the global economy because of his trade wars which drove the Fed to lower the Fed fund rate three times by 0.25% in the period from Jul. 31 to Oct. 31, 2019.

3: Thank to the Fed which sparked economic recovery in the second quarter of last year by its response to the crisis by lowering the interest between zero, increasing its holdings of Treasury securities by at least $500b and its holdings of government mortgage-backed securities by at least $200b, widening its balance sheet initially by USD2.3tr, before driving it up to surpass in May 2020 USD7tr level and meanwhile at the end of last May it reached another all times high at USD7.935703tr.

The Fed encouraged banks to keep their discount window opened as wide as it possible by removing the RRR to provides financing access using all of their available capital and liquidity to lend the household sector and spur business investment.

The Fed could support by these ways the small businesses and weigh down on the cost of borrowing for stimulating the economy generally and lower the US government borrowing costs to help it to finance its reflation plans by easier way.

You should also remember Jackson Hole symposium last August, when The Fed’s chief Powell outlined new strategy of letting inflation to run hotter than normal in order to support the labor market and the broad economy prioritizing employment over price rises,

He showed by that outline more tolerance about The Fed’s regular 2% yearly inflation expansion target it adopts over the medium term and this tolerance is running until now with the Fed’s core PCE preferred gauge of inflation scoring of 3.1% yearly surging last April mainly on transitory factors as the Fed sees.

Eventual monetary tightening

However, the markets started to price on an inevitable step to tighten this ultra-easing policy amid momentum in the service sector and also in the manufacturing sector, labor market improvement and surely inflation upside pressure receiving at the end all these pumped liquidities even if the current yearly soaring rates are on transitory factors.

Philadelphia Fed President Patrick Harker could easily prompt last week what you can name initial wave of selling in the equities market amid yields increasing in the secondary money market boosted demand for the greenback by going along with his partner Robert Kaplan of Dallas giving barely hint about tightening of this policy, saying that it is time think about thinking about tapering of the current $120b QE pace of monthly purchasing!

Actually, the Fed told the same by even a stronger hint, when it decided last week to wind down its corporate bond and ETF program worth of $13.6, showing that there are tangible talks about that tightening and the Fed’s looking into its tools to curb inflation as it said on its president tongue previously without naming these tools in his recent testifies, before the senate banking committee and the congress financial committee.

A stronger reference to looking into tapering of QE is expected on Jun 16, when the FOMC’s members meeting is to end to new projections of interest rate, growth, inflation and unemployment, however no expected nearby action, before clear guidance and that can be later by this yearend by God’s will, before the Fed’s balance sheet to reach $10tr psychological level.

Longer end of QE tapering

The gold hedge against inflation could be underpinned, following the depressing release of May labor report and it is now trading near $1900, after it had been undermined by Harker hint, USD extended its slide versus its rival major currencies in the beginning of this week on persistence of UST 10yr Yield existence well below 1.6% as the US labor market can tackle the Fed’s advance to tapering.

Equities are cheered by the speculations of having longer period of stimulation time for boosting the US labor market and expected more Biden’s submissions to republicans to lower his taxes hikes proposals to finances his $4tr plan to make it passed soon, as he and his treasuries secretary wishes to have them intact by Jul. 4.

Financial stability risk

However, we can see also negative consequences and risks of this cheap liquidity like what we have seen recently of Game Stop stock manipulation which can easily be repeated with others to come as targets to make quick profits by short-term traders using excessive high leverages to make profits in the equities markets or even in commodities market which is looking waiting for its turn in this usual circulation of liquidity row to be boosted further fueling further inflation waves.

Game stop could really put doubts about the financial stability and highlighted the current serious need for taking measurements to tackle excessive use of leverage can threat the financial stability, amid the current pumped liquidities from central banks and governments into the financial and the banking systems to boost the real economy.

While it is hard to make such profits of manipulations with giant’s well-bid blue chips equities in the market having solid fundamental and financial situations specially after what they have already made since March 2020.

OPEC+ watching out

Oil prices are still also well-bid on expected increasing demand on the current running global economic recovery, amid continued stimulating plans from the central banks and governments and that drove the Russian energy minister Novak to say during the OPEC and its oil-producing allies meeting that there is actually currently 1m barrels a day shortage in the market.

The meeting ended to the same plan to boost the output in July, according to OPEC+’s decision in April to give back 2.1m barrels per day to the market in the period between May and July.

OPEC+ agreed initially to cut oil production by 9.7m bpd last year, before lowering that cut to 7.7m, then eventually 7.2m from January to reach only 5.8m of cut by the end of July.

While Western-Iranian accord to bring it back to the market can bring back with it about 3m bpd. So, the news about nearby compromise weighs down on the prices in this period of time the OPEC and its allies are watching in to take their next decision on.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

15th March 2021 – Higher yield versus Higher inflation

mail@fx-recommends.com (Walid Salah El Din) — Mon, 15 Mar 2021 06:18:00 +0000

The Equities markets are still trying to live with the current higher UST yields which weigh down on the investing spending.

UST 10yr yield ended last year close to 0.95%, before the run to the current level above 1.60% which has been sparked by the Democratic winning of US Senate runoff for Georgia 2 seats.

Dems rewarding back

The winning raised the odds for having stronger reflation plans to come, amid Democratic control of the house and senate and shortly it has been materialized by Biden $1.9tr relief which was like a reward to the voters the republican refused to share in representing, after their failure.

The plan which is to boost the US family by Lower cutoff limits for $1,400 payments it contains could add to the Dems political situation.

Specially, as it is to be without higher corporate taxes to finance till the crisis end as US Treasury secretary promised before the senate, before affirming her mandate to the position.

Yellen referred to the need to act big as the Fed does and the benefits of doing that meanwhile surpass the worry about the current widening fiscal deficit.

But the money markets did not believe that and sent the cost of borrowing higher from a side because if it is to succeed it will speed up the recovery and from other side if it is to succeed or not, the funding of that growing debt carries higher risks and hurts the creditability of US.

Growth on Debt again

The current debt level surpassed last week USD28tr reaching now USD28.05tr and US Debt to GDP ratio reached new all times high at the end of 2020 third quarter recording 127.7% and hurting the creditability of US which is still struggling to have faster growth rates, after easing down to 4.1% annualized GDP growth rate in the fourth quarter of last year.

The OECD expected last week US GDP growth rate to reach 6.5% from 3.2% it was expected 3 months earlier because of Biden’s $1.9tr plan which can contribute in raising the global economic growth rate by 1% this year.

The US economy has already got boosts by several reflation plans valued more than USD1.5tr, before the virus crisis during Trump's era which watched also threats to the global economy because of his trade wars which drove the Fed to lower the Fed fund rate three times by 0.25% in the period from Jul. 31 to Oct. 31, 2019.

Fed’s holding

But now, it’s most likely to see the Fed letting the higher yield facing the higher inflation pressure next, getting out from the equation without taking a side.

The Fed has been actually criticized by fueling assets bubble and contributing in using of higher rates of leverage in the equities market during The Fed’s Chief Gerome Powell testifying before the senate banking committee last month.

Powell did not deny this time, referring to that the Fed is only one element among others.

The Fed may be willing ahead to carb that bubble by letting the yield curve rising, while we are ahead of facing higher yearly inflation wave this spring, due to last spring economic paralysis which drove the energy and commodities prices down significantly.

But now the situation is completely different thanks to the central banks easing efforts and the governments relation plans and the current existence of vaccine against Covid-19.

Worried ECB versus unfazed Fed

The FOMC members did not show to the markets serious concerns about the yield rising in the secondary money market or readiness to react to that rising before their next meeting.

While the ECB governing council members looked worried about the yield rising in the European money market which started to follow its US counterpart and the statement which has been released following their meeting last Thursday has highlighted that concern by referring to increasing of PEPP pace of buying next quarter to tackle that rising.

The ECB has been actually concerned about EURUSD appreciation to 1.2350 in the beginning days of this year which has been to them unreasonable.

The comments which came out from ECB until now was aggregately referring to the need of watching closing the money market changes.

It’s hard to detect comments from ECB governing council members talking about higher growth outlook driving these yields up or even inflation outlook as you can find easily in US from the Fed which preferred to not temper the market by mentioning certain tools to face the next higher transitory inflation pressure to come by God’s will.

While the ECB seemed taking the governmental bonds yield rising seriously relatively to other major central banks facing the same situation and on the clear discrepancy between the Fed and ECB, EURUSD came under pressure and was the most favored for selling recently.

China faces inflation first

The situation in China is not completely different or separated from US, as PPI is rising and can export inflation pressure all over the world not only US which is still its major trade partner.

China PPI rose by 1.7% yearly in February from only 0.3% in January and this inflation pressure over the producing level is expected ahead to be transferred to the consuming level and that can cap PBoC from prompting more stimulus plans.

PBoC Deputy Governor Chen said recently that “China’s money supply growth would not exceed GDP growth and PBoC does not see any need for major stimulus over the next five years”.

The Golden track

We need to see and evaluate ahead the markets readiness to live with these current yields rate which are still exposed to the upside, as the last US session move by the end of last week has shown.

The ability of Gold to rebound can be an indication of the equities markets’ ability to do too. The gold does not give yield and it came under increasing downside pressure sent it to $1676 per ounce, amid markets focusing on the UST yield curve to take their keys from its directions.

The gold ability to rebound to $1730 currently deserves to take your attention, while UST 10yr yield is at its highest level since US economic shutdown near 1.635%.

We need to see whether or not it can be able to hold what it gained in the recent hours amid yields rising without divergence to the downside.

XAUUSD could extend its rebounding which started last Friday from $1700 area to reach to $1733.99 per ounce in the beginning hours of this week.

But it lost momentum again to be trading currently near $1725 per ounce without surpassing last week peak at $1739.77.

But reaching this peak drove Parabolic SAR (step 0.02, maximum 0.2) upside down and XAUUSD is trading now in its fourth consecutive day above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1682.60.

The Gold is still well below its daily SMA50, its daily SMA100 and also its daily SMA200 since forming another lower high at $1855.30 on last Feb. 10

The daily chart of XAUUSD shows that its RSI-14 is still at inside its neutral area reading 39.231.

XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its neutral territory reading 74.008, leading to the downside its signal line which is now higher inside the neutral area reading 77.546, after negative crossover inside this neutral area, following spiking up inside its overbought territory above 80.

Important levels: Daily SMA50 @ $1807, Daily SMA100 @ $1837 and Daily SMA200 @ $1858

Experienced S&R:

S1: $1670.52

S2: $1566.42

S3: $1451.11

R1: $1739.77

R2: $1815.90

R3: $1855.30

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

2nd February 2021 – The money supply risks loom triggering reassess of equities progress

mail@fx-recommends.com (Walid Salah El Din) — Tue, 02 Feb 2021 14:53:00 +0000

The single currency is still depressed by the ECB’s worries about its appreciation in the beginning of this year which drove it 1.235 versus the greenback sparking criticizing against this unreasonable appreciation negative impact on the current struggling inflation forces and the exporting activities in EU.

Fear of Deflation in EU

EURUSD bounces above 1.2150 have been faced by more comfortable selling speculations since ECB’s broad Dutch member Klass Knot highlighted these worries by referring to the probability of cutting the deposit rate further to face that appreciation which erodes the ECB’s efforts to stimulate the economy and caps it from reaching its 2 percent inflation yearly target.

His comment did not shock the single currency only, but also triggered risk aversion sentiment, as his comments were more aggressive than the ECB announced stance and more obvious than the ECB’s president Christian Lagarde which has tried to neglect criticizing the single currency appreciation and focused in its words on the impact of that appreciation on the inflation outlook.

After the ECB decided last month to keep unchanged the main refinancing rate at zero, the marginal lending facility at 0.25% and the deposit rate at -0.5% with extending the Pandemic Emergency Purchase Program (PEPP) to March 2022, totaling €1.85tr for purchasing the issued bonds by the EU governments which are in strong sake of lower money costs to finance their needed reflation plans to boost the economy.

No way to object inflation

From the other side of the Atlantic The Fed Chief, Jerome Powell assured on the Fed’s tolerance stance on inflation by saying that it will be patient and will not react if there are small transient inflation increases.

After he has previously outlined at Jackson Hole symposium last August a new strategy of letting inflation to run hotter than normal in order to support the labor market and the broad economy prioritizing employment over price rises, showing tolerance about The Fed’s normal 2% yearly inflation expansion target it adopts over the medium term.

His words came to calm the equities markets, following rising worries about inflation upside risks in US, have been triggered by the release of December labor report which has shown average hourly earnings for all employees on private nonfarm payrolls rising by 23 cents to $29.81 by 0.8% monthly and 5.1% yearly, despite unexpected losing of 141k of jobs out of the farming sector last December.

So, we can get ready for higher inflationary wage pressure, without intervening from the Fed to trim the current offering money pace by raising rates or even by tapering of its QE purchases which reached $120b a month.

The Fed’s opened hand

As widely expected, The FOMC members assured last week on their readiness to act again, if needed to underpinned the economic activity and support the labor market which moderated recently.

After robusting labor market performance has been sparked in the second quarter of last year by the Fed’s response to the crisis last March by widening its balance sheet initially by USD2.3tr, before driving it up to surpass last May USD7tr level ahead of reaching its highest level ever by reaching to USD7.414tr on last Jan. 18. The Fed could support by this way the small businesses and weigh down on the cost of borrowing for stimulating the economy generally and lower the US government borrowing costs to help it to finance its reflation plans easier.

The reflation boosts

In the same time the new US secretary Janet yellen promised to not impose higher corporate taxes to finance these plans and indicated that she will not plan to impose higher taxes, before getting the economy out of the crisis because the economic risk is more important now than the financial situation which can be sustained later!

While the new government is trying now to start Biden’s era with passing new relief package worth $1.9tr, Despite the current debt levels which reached USD27.8tr and US Debt to GDP ratio which reached new all times high at the end of 2020 third quarter recording 127.7% and hurting the creditability of US which is still struggling to have faster growth rates, after easing down to 4% annualized GDP growth rate in the fourth quarter of last year.

While The markets are still looking forward for substantial relief packages to revive the household sector and underpin the government spending and in the same time betting on easier Sino-American trade tensions under the new US President-elect Joe Biden's leadership which may end the US trade wars too.

In Brief, The Fed's easing policy can be extended for considerable period of time and it has the ability to do on contrary with others less-flexible central banks which face difficulties at the current historical low rates.

By a way or another, The Fed can twist again its current holding of governmental debt into longer period debt and it can increase its purchasing and widen its balance sheet further.

While the financial policy in US is expected to give further support to boost the economic expansion momentum in the wake of Corona virus by more reflation plans.

So, it looks that we are ahead of further floods of cheap money supply to boost the economy, the demand for energy and raise the prices of assets, equities, Gold and the digital currencies as well as a hedge against inflation by God's will!

Money Supply risks

We can see also negative consequences and risks of this cheap liquidity like what we have seen recently of Game Stop stock manipulation which can easily be repeated with others to come as targets to make quick profits by short-term traders using excessive high leverages to make profits in the equities markets or even in commodities market which is looking waiting for its turn in this usual circulation of liquidity.

While it is hard to make such profits and manipulations with giant’s well-bid blue chips equities in the market having solid fundamental and financial situations specially after what they have made of the rallies last year.

Game stop could really put doubts about the financial stability and highlighted the current serious need for taking measurements to tackle excessive use of leverage can risk the financial stability.

Amid the current pumped liquidities from central banks and governments into the financial and the banking systems to boost the real economy which is still lagged behind what have been made of profits in wall street because of this cheap bid money which is expected to reside at the end in the companies’ profitability as the investors plan and wish.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

2nd November 2020 - The good news is certainty not Biden nor Trump

mail@fx-recommends.com (Walid Salah El Din) — Mon, 02 Nov 2020 10:51:00 +0000

The good elections outcome to the markets is not Biden nor Trump, as it is the certainty which could be following these elections.

Any news about the presidential elections results from Pennsylvania, North Carolina and Florida will be tracked, but any surprises from any other state will be shocking to the current pricing in the markets.

The long-lasting outcome for any reason can dampen the market sentiment and cause sell-off in the equities markets triggering worries about already worrying situation. As The markets will not welcome tied results triggering uncertainty about the future of the economy and harden its situation which is already hard.

As usual also any results refer to taking the house by a party and taking the white house by another party are not that good news to the market.

Because this will also harden taking crucial decisions easily to stimulate the economy which has already lived in sake of another reflation plan for more than 2 months with no clue because of the conflict between the 2 parties which lasted till the elections with no solution.

While the rising of Covid-19 cases is weakening the global economy exposing it to double bottom recovery formation or may be worse.

We have also other events this week such as today Oct manufacturing PMI releases from the big industrial economies which are widely expected to show continued improving.

But the current cautiousness because of the virus spreading is taking the market attention more nowadays and can tackle the building on these data. Even the progress in talking about Brexit deal between EU and UK could not cap the GBP from falling in the beginning of this week on the worse than expected Covid-19 news from UK which triggered more than expected aggressive lockdown response from The PM Boris Johnson.

We have also next Wednesday the outcome of a new FOMC meeting, However it is widely expected to come with no new keeping its waiting stance as it is unchanged since the committee has decided to lower the Fed fund rate to be between zero and 0.25% last March, When it decided also to encourage the banks to keep their discount window opened as wide as it possible by removing the RRR to provides financing access using all of their available capital and liquidity to lend the household sector and spur business investment and that what has actually happened.

By God's will, We have also by the end of the week the release of Oct US labor report which is expected to show adding 700k of Jobs out of the farming sector and rising of the average earning per hour by 4.6% yearly.

The volatility is not such a thing that can be avoided this week and it can keep rising over the short term during these events which are overwhelming the markets. So, Take Care!

Have a good day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

21st September 2020 - Trump blessing of Oracle-Tik Tok deal raises the demand for risky assets

mail@fx-recommends.com (Walid Salah El Din) — Mon, 21 Sep 2020 02:00:00 +0000

The US equities future rates rose and also the demand for loading risks during the first Asian session of this week, after Trump blessing of Oracle Tik Tok deal. The deal lowered the pressure on the technology sector which attracted the markets attention by its slide during the last 3 weeks.

The deal looked short of his demand but looked eager to support the equities anyway right now. So, Nasdaq 100 future rate approached 11000 psychological level again, following diving during the last US session of last week to 10765, while Nikkei 225 could rise to 23360.

The demand for risky assets lowered the demand for USD sending GBPUSD higher to be traded near 1.2950, As it seemed to the investors that there is no serious need for further liquidation yet and the US equities can find again its upward track soon!

While the pledges are coming from both of Trump and Biden sides to give to support the markets but anyway, it is still looking to the investors that Biden's winning an end to US trade wars and this can be enough to send their risk appetite higher and higher.

In the same time, Trump's winning is not that bad issue that can threat the equities markets, as he could support the economy and create jobs by reflation plans worth $1.5 trillion and looked unneeded in the beginning of his period but later they were useful to curb the economic easing down and he could also put pressure on the Fed to adopt very easy policies.

Trump criticized the Fed raising rates action strongly by the end of 2018 and he called for changing the 2% target inflation policy of the Fed and make it higher to 3% to pave the way for longer period of adopting easy policy to support the economy and he named the Fed the enemy of this economy as it erodes his efforts to support the economy.

Now the Fed is in line of all of these and the FOMC members expressed last week that they are open to adjust the monetary policy further as needed by using all of its tools to support economic recovery, while the economic recovery remains on track and vaccine hopes are rising.

But they suggested that they will remain on pause for now and they shifted to an average inflation target accepting higher inflation rates to come above 2% before moving higher of rates to compensate the periods of lower inflation rates during the economic struggling because of Corona virus.

The committee lowered the inflation outlook to 1.0% from 1.5% they expected in June and they expect US GDP to contract annually by only 3.7% not by the 7.6% they expected in June and they expect the unemployment rate to fall to 7.6% at the end of 2020 comparing to 9.3% they were expecting in June.

While the Fed fund rates are expected to hold unchanged for next 2 years and the Fed's Chief Powell suggested that the Fed's actions may to be enough but the fiscal support may be needed.

The demand for equities looked more fragile, after this statement which suggested that the Fed sees no need for more liquidity to be pumped to the economy shortly and So, The equities became more vulnerable to the downside with no more expected Fed's backing to come.

From other side, the economic data disappointed the markets last week, as US Retail Sales figure of august has shown rising by only 0.6% monthly, while the consensus was referring to 1% showing how the consumption can be negatively impacted by the end of the supplementary $600 weekly unemployment support with continued rising of COVID-19 cases.

While the Senate Republicans are still on their substantially scaled-back stimulus plan can worth only 1 trillion and their Dems counterparts are still looking forward for what's more than $2.2 trillion to address the economic devastation of the pandemic, scaling back the odds of reaching deal by the presidential elections.

Have a good day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

2nd September 2020 - The lower EU inflation puts pressure on the common currency

mail@fx-recommends.com (Walid Salah El Din) — Wed, 02 Sep 2020 08:28:00 +0000

The European equities indexes are trying to track the future of the US ones which are always referring to the upside.

The germane DAX 30 could get over 13200 "until now", following Nasdaq technology companies shares boom which barely have bottoms over the short term to be re-purchased again, while Nasdaq 100 future rate is referring now to existence close to 12430.

No one knows exactly what fuels that bubble of the US equities, despite the down side pressure of corona virus on the economy which is still struggling to regain its previous expansion pace and hiring momentum with no bipartisan conviction yet over new stimulus reflation plan.

EURUSD could get over 1.20 psychological level yesterday scoring higher high of this year at 1.2009 but US ISM manufacturing index of August could revive again the demand for the greenback across the broad sending EURUSD down to be traded now below 1.19 near 1.1875.

while the single currency is not looking in good conditions, as it is expected to have similar shift in its monetary policy and inflation targeting as the Fed's chief Powell outlined at Jackson Hole symposium last week, letting the inflation to fly higher than its normal 2% yearly expansion target it adopts over the medium term to support the economy and labor market which can get ready for higher inflationary wage pressure, without intervening from the Fed by raising rates.

In the same time, EU CPI flash figure of August came out yesterday to show continued slide to the downside referring to yearly slump by 0.2%, while the consensus was pointing to increasing by this same rate, after rising by 0.4% in July and even the core figure excluding food and energy rose by only 0.4%, while the median forecast was rising by 0.9% following soaring by 1.2% in July.

The figures show that there can be another easing step to come somehow by the ECB and that can boost demand for EU equities further and hurt the common currency appreciation which weighs down further on the inflation. The ECB Chief Economist clarified at these current levels of exchange rate that The ECB is monitoring the EUR values!

The last easing step of ECB was by raising its emergency bonds buying program higher by added €600b last June, as the labor market was rapidly deteriorating and the contraction is “significant” but Christine Lagarde the head of the bank expected although rebounding in Q3.

God willing, the market will be waiting next week for the ECB governing council members meeting with higher hope for further easing action can be by expanding its QE program or Pandemic Emergency Purchase Program (PEPP).

Despite The German court ruling judgment to cap ECB QE plans which have been granted previously in Dec 2018 by the ECJ (European Court of Justice) to let the ECB buy governmental issued bonds.

Have a good day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

28th August 2020 - The Fed's inflation targeting policy shift put more weights on USD

mail@fx-recommends.com (Walid Salah El Din) — Fri, 28 Aug 2020 09:31:00 +0000

The greenback is still depressed by the Fed's inflation policy shift to allow the inflation level to rise above 2% to compensate the period of having this rate below 2%.

The Fed's Chief Jerome Powell's dovish message from Jackson Hole paved the way for accepting higher inflation rate, before intervening to raise the interest rate to curb it.

The higher inflation rate can boost the demand for gold as a hedge against inflation over the coming months following the economic recovery from the negative impact of corona virus pandemic, while the Fed will be looking to compensate the period of struggling during the crisis when the inflation dampened down below its 2% yearly target.

The greenback came easily under pressure versus its rival currencies and it is now trading near 1.327 versus the British pound, While EURUSD is now trading above 1.19.

XAUUSD has been exposed to volatility yesterday pushed it up to 1976$ per ounce before dragging it down to 1910$ where it managed to rise again to the current level close to 1950$, as the Fed will allow USD to fall over higher inflation level without raising rates.

Previously, the Fed was targeting 2% and the FOMC members said in their most recent meeting on last July 29 that The employment and inflation are still facing downside risks over the near term and there will be considerable risks to the economic outlook over the medium term.

The committee members did not take any action and refrained from placing yield capping targets as these targets would likely provide only modest benefits in the current environment as the minutes of that meeting have shown.

While the odds were rising to take such action as BOJ did on Sep. 21, 2016, when it decided to place 10yr JGB yield target near Zero percent to fight deflation and raise the prices.

The Fed's inflation targeting shift can keep the interest near zero percent for years to come with no change and it can be easily followed by other central banks and these all can pour in the benefit of gold and weigh down on the currencies buying power.

This policy can also boost demand of the US equities which are actually considerable boosted by the previous taken measurements and government reflation plans which can reach 4 trillion in case of reaching a new bipartisan deal. While Both of S&P 500 and Nasdaq 100 are making new highs and also gold can be better buoyed at dips!

While the treasuries yields cannot capture the advance of the economic recovery which can easily now produce higher inflation wages pressure and assets prices.

God willing the market will be watching ahead today the release of Jul US PCE deflator which is expected to show yearly increasing by 1.2% after 0.8% in June, while The core PCE figure excluding food and energy which is the Fed’s preferred gauge of inflation is foreseen to be up by 1.1% after rising by 0.9% in June.

US consumer spending figure which accounts for 70% of US GDP which be released too today and it is expected to show monthly rising in July by 1.5% following rising by 5.6% in June, with decreasing of the personal income by 0.2%, after falling by 1.1% in June.

Have a good day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

15th June 2019 - The fear of second contamination wave dominates the market sentiment

mail@fx-recommends.com (Walid Salah El Din) — Mon, 15 Jun 2020 09:33:00 +0000

The risk aversion mood which could contain the market sentiment last week is still looking reasonable to the market participants, as the fear of a second contamination wave is still existing amid the protestations in US which is opening its economy with daily basis deaths number above 500.

The EU economy is still trying to restart also, but it needs to be isolated for considerable period of time to slow the next waves and not to repeat the scenario of the first wave which can be followed by other lower highs waves, before having a social immunity can be reached within nearly 2 years, if there is no effective medicine or vaccine to come to end this nightmare.

China shocked also the world by seizing 11 districts in Beijing, after detecting 57 infected case, while the major economies are still vulnerable to lots of downside risks and geopolitical concerns.

While The US economy is still looking also ahead of a second wave of contagion, amid the current persisting protestations which may hold, till the next presidential election.

As there is no easing signs yet Specially following this new aggressive incident in Atlanta which has been read widely, as a violent unneeded reaction from another white policeman against another black man showing to the public there is really need to change in US.

In this same time, Trump is looking more astray and hesitating than before, as his departure became looking a solution for bringing back calmness to the streets and getting back to business, with no more problems can be spurred by his existence.

Many republicans are afraid now of losing everything by adopting his policies in dealing with the crisis which came after massive drop of the labor market.

Some republicans Icons are willing now to let him down more than before such as The former presidents George W. Bush, beside many other fired members from Trump's own selected administration.

While the Dems are gathering momentum without even doing anything, but their being as the only available solution.

They are not even in need to get use of the situation by making greater roles to black supporters such as Michelle Obama which has popularity now more than her husband.

Trump's leaving could mean a lot to the markets which can understand this as an end of US trade wars and returning to many of the pacts the US has left since Trump took his office!

The US equities are not yet priced on that possibility which can grow up next sending their prices higher and raising the hopes for retrieving the economic ascending pace during Obama's era following the credit crisis.

As expected the FOMC members last week assured in their released economic assessment following their meeting on the Fed's readiness to support the economy further, if it is to needed.

The committee was impressed by the improving of the labor market in May, but it refrained from pushing the hopes higher preferring to highlight again the current downside risks which can drive the economy to shrink by 6.5% this year, before easing later letting the economy to expand again by 5% next year and by 3.5% in 2022.

The committee decided to keep the Fed fund rate unchanged unanimously between zero and 0.25%, as widely expected as it has been since lowering it by 1.5% last March, when it decided also to encourage the banks to keep their discount window opened as wide as it possible by removing the RRR to provides financing access using all of their available capital and liquidity to lend the household sector and spur business investment.

In response to the crisis, the Fed managed to widen also its balance sheet initially by USD2.3tr driving it to surpass in May USD7tr level before reaching USD7.165tr in the beginning week of this month to the support the small businesses and lower the cost of lending to the government which could pass until now USD3tr reflation plan to revive the economy which has been already waiting for more financial stimulus plans to come, following the US presidential elections in case of Trump's winning as he promised, before this current sparked crisis by Covid-19.

The US economy has already got boosts by several reflation plans valued more than USD1.5tr during Trump's era which watched also threats to the global economy because of his trade wars and that drove the Fed to lower the Fed fund rate three times by 0.25% in the period from Jul. 31 to Oct. 31.

He and who can be in his place can really find it harder to support the economy by more funds at these current debt levels near USD26tr, after US Debt to GDP ratio reached new high at the end of 2019 by rising to %106.9, amid warnings from the Fed, before this current crisis which can make the ratio grow to unsustainable levels hurting the US creditability.

The Asian equities struggled in the beginning of this new week, amid increasing worries about the Covid-19 impacts, while US S&P 500 future rate is fighting now to have footing close to 2950, after limited rebound last Friday to 3087.20.

The worries about the global economic recovery weighed down also on the oil prices in the beginning of the new week, after they have been already aggregately exposed to profit taken, following their rally which started last Apr.21 and continued to this Jun. 7.

Have a good day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

2nd June 2019 - The bullish sentiment is weighing on USD, while EUR is waiting for the ECB

mail@fx-recommends.com (Walid Salah El Din) — Tue, 02 Jun 2020 16:15:00 +0000

The US equities indexes are still rising unfazed of the unrest over George Floyd's death. it is good sign about the current recovery resilience and the believe in the economy ability to get over corona virus crisis.

The improving of the risk appetite could push the investors away from the greenback and the Japanese yen boosting demand for EUR and GBP, after The equities started the week undeterred by these riots which extended nearly to all US cities following the incident of George Floyd killing by a white police man. From another side, the oil prices rebounding could also give a boost to the equities market and the believe in an economic recovery to come sooner than later, however the oil prices bouncing currently is basing mainly on OPEC+ cuts which can be extended for longer period of time, while the demand for energy is recovering cautiously.

While The regularly PMI manufacturing data which release in the beginning of each month have shown improving in the May in all of the G7 countries sometimes better than expected like China and the services sectors data of these nations are also expected to show improving tomorrow.

While the markets main concern is still about corona virus second wave infection can gather momentum by these current demonstrations in US which reached Europe too.

The virus stance in Europe is much different. The complete curfew held for more than 8 weeks not for barely 3 weeks as the stance in US. and now all cases nearly appeared in EU and the health sector could deal with them by the possible means and thus as long as there is no cases among us at home, there will be no cases among us in the street.

The EU economy started to open step by step, but it needs to be isolated for considerable period of time to slow the next waves and not repeat the scenario of the first wave which can be followed by other lower highs waves, till a social immunity can be reached within nearly 2 years, if there is no effective medicine or vaccine to come to end this nightmare.

The markets will be next Thursday for the ECB governing council members meeting with higher hope for further easing action can be by expanding its QE program or Pandemic Emergency Purchase Program (PEPP), despite The German court ruling judgment to cap ECB QE plans which have been granted previously in Dec 2018 by the ECJ (European Court of Justice) the ECB to buy governmental issued bonds.

The ECB president Christine Lagarde assured last meeting on that the bank is ready to take more steps to support the economy in the same time she stressed on the financial policies role as she used to.

The ECB president Christine Lagarde said recently that she no longer believes in mild slowdown and we are between the medium and severe scenarios expecting the economy to shrink by stronger rate than the financial crisis which hit the world in 2008.

Actually, This crisis and also previous credit crisis in 2008 have highlighted the big difference between the US ability to response and the EU ability which very lagged behind US which could enter tightening cycle in 2017 and 2018 before starting easing back, while the ECB is still tied standing still unable to even follow the FED which is really working along with the government to give the needed support to the economy.

Even before this current sparked crisis by Covid-19, the US economy could got boosts by several reflation plans worth more than USD1.5tr and has been actually waiting for more financial stimulus plan to come following the US presidential elections.

In response to the crisis, the Fed's balance sheet expanded by about USD2.3tr until now reaching USD7.037tr, while the US government could initially mull a stimulus plan worth $1.2tr and is expected to be expanded to more than USD3tr next to revive the economy.

While EU is still struggling to implement the hardly reached agreement by the EU commission to prop up the economy by €750b package backed by Germany and France against the Frugal objecting Four "Sweden, Austria, Netherlands and Denmark".

After forming a higher low at 1.0870, EURUSD could be able to surpass the psychological 1.10 level and gather higher momentum to reach 1.1195 today.

After forming this higher low at 1.0870, EURUSD could come over its daily SMA50, its daily SMA100 and also its daily SMA200.

EURUSD is now in its tenth consecutive day of being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 1.0905.

The daily chart shows that EURUSD RSI-14 is referring now to existence inside the overbought region above 70 reading 70.012.

EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now also its main line inside the overbought territory above 80 at 89.249 leading to the upside its signal line which is lower inside the same area at 88.940, after positive crossover inside the neutral region, following forming a higher low at 1.0870.

Important levels: Daily SMA50 @ 1.1081, Daily SMA100 @ 1.1163 and Daily SMA200 @ 1.1240

Experienced S&R:

S1: 1.0870

S2: 1.0726

S3: 1.0634

R1: 1.1195

R2: 1.1236

R3: 1.1366

Have a good trading day

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

30th April 2019 - The single currency is still waiting for an impressing ECB's action

mail@fx-recommends.com (Walid Salah El Din) — Thu, 30 Apr 2020 05:07:00 +0000

After continued EU failure to reach even a conviction among its members to support the EU economy as one, the turn is now on the ECB to take further stimulus actions to support the EU stagnant economy.

Following Mar. 12 ECB governing council members meeting, ECB president Christine Lagarde assured on that the bank is ready to take more steps to support the economy in the same time she stressed on the financial role as she used to.

The markets are still in the sake of EU co-ordination to stave off the economic slide to lower points before rising.

This required cushion is still far from reaching, despite the crisis which actually show many deficits in the union which could not face the crisis as one nation or even well structured to do as commitment.

This crisis and also previously the credit crisis in 2008 have highlighted the big difference between the US ability to response and the EU ability which very lagged behind US which could enter tightening cycle in 2017 and 2018 before starting easing back, while the ECB is still tied standing still unable to even follow the FED which is really working along with the government to give the needed support to the economy.

In response to the crisis, the Fed's balance sheet expanded by about USD2.3tr until now reaching USD6.6tr, while the US government could initially mull a stimulus plan worth some $1.2tr including $1k to every American.

While the Economic situation in EU is still struggling to implement the hardly reached agreement by the EU finance ministers on a €540b package to prop up the economy which locked down because of the pandemic,

While it is forbidden in EU to watch direct funding to the EU governments deficit by the ECB which can only intervene in the secondary money markets to lower the debt yield, The FOMC members as expected ended their meeting yesterday on keeping its unlimited QE program on for buying Treasuries.

The committee kept also its indoors funding windows opened for households and small business and also outdoors swap lines to supply USD to other central banks on the lowest possible costs to restore confidence in the banking sectors across the globe in the face of the current disruptions.

The shared currency is still depressed on this current economic stance in EU and the inconvenient political situation in EU on funding the EZ countries debts which can keep the door opened to the ECB to do whatever it can to revive the economy even if it is to be on the account of the common currency value which reflects all of these current facts which made it vulnerable to the downside recently.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

18th March 2019 - a quick look at the current economic paralysis

mail@fx-recommends.com (Walid Salah El Din) — Wed, 18 Mar 2020 03:42:00 +0000

The Covid-19 virus can keep putting the countries between choosing the illness or the economic paralysis.

All governments are still asking people to stay at home regardless shutting down the economy by this way which cannot last for months or even weeks but the economic impact can threat their life too later, if the virus to hold longer.

Most of the governments adopted reflation measurements on their capacities to fight the virus negative economic impacts and prop up the economy as soon as possible.

As it became clear that the recession is ahead, despite taking excessive easing steps by several central banks but not all countries can withstand the cost of these reflation plans or even to be closed for months before deploying such plans.

Other countries cannot afford supply chains or even salaries without active economy and others cannot import their needs and may be others cannot give the required medical support, while they are importing most of their needs.

Living in this economic stance can cause severe damage to many countries currencies and may lead to bankruptcies to some countries, actually at the edge of failure to fulfill their financial obligations.

The high hope currently is in the summer which can cap the virus existence outside the bodies and limit the infection to the minimal level.

But that can be also a tale we cannot believe in easily, as the virus is still spreading by the same scale outside China which can have it back from other countries after it could nearly contain it, while the southern half of the earth is waiting where the winter is to come next to host this virus.

While all who have problems in their immunity system or respiratory system should hide as long as this crisis is holding!

The Fed lowered the interest rate to Zero and decided to increase its holdings of Treasury securities by at least $500b and its holdings of government mortgage-backed securities by at least $200b billion in the coming months.

But when can all of that put in place, while the people are asked to hold home choosing the economic paralysis, even if they are to have this promised $1k directly to be spent during this holding period but what is next, if the virus is to hold longer.

Actually most of the economy sectors are down and we may find US non-farm payrolls figures next referring to losing of more than a million in a month, while the virus is still holding alive among us and the monetary policy is running out of effective tools to stimulate that stagnant economy.

Even who were liquidating their reserve positions causing excessive gold movement to the downside can run out options to sustain their financial situations and avoid closing of stocks exchange markets.

FOMC members said that they will continue to monitor closely the market conditions and the committee is prepared to adjust its plans as appropriate.

This message tells that there can be rising back of the interest rate again, if the current critical situation to end but what it can tell if it is to exacerbate further!

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

9th March 2019 - The fear of economic paralysis on COVID-19 outbreak takes control

mail@fx-recommends.com (Walid Salah El Din) — Mon, 09 Mar 2020 01:35:00 +0000

The fear of economic paralysis drove the oil prices aggressively down losing about 30% in the beginning trading hour of the week which started an hour earlier.

After OPEC + meeting failure to reach a deal to cut the output by 1.5m barrels per day more, as Alexander Valentinovich Novak Russian oil minister insisted on waiting longer to see the Corona Virus impact on the global economy!!

The failure raised the speculations on OPEC + group breaking up driving down The Giant Saudi oil company Aramco stock price below its IPO price trading near 30 RS.

Alexander Novak said Friday that "As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier"

While OPEC Secretary-General Mohammad Barkindo comments showed that the OPEC members frustration because of the Russian situation which indicate Russian readiness to accept lower prices!

WTI is now fairly trading close to $33 per barrels after these events, while the markets are anxiously waiting now for upcoming trust in global economic recovery from that virus which dampened the market sentiment the risk appetite.

The returning of this trust can raise up the demand for oil

From my perspective, on these current oil prices, there could be another emergency meeting among the OPEC + members at least to extend the current 1.7m bpd output cut well beyond the beginning of next April, before expiration can lead to more disruptions.

USDCAD which has been actually boosted by BOC's decision to cut the interest rate by 0.5% to 1.25% last Wednesday rose further in the beginning of this week trading near 1.36 on the current lower oil prices which dampen the Canadian exports value.

After meeting among the G7 Fin Ministers and central bankers, The Fed previously sparked the easing waves by cutting the Fed fund rate by 0.5% sending Gold for trading currently near $1700 per ounce.

despite the continued trust in the US labor market which lowered the odds of taking further Fed's easing actions last Friday, following the release of upbeating labor report caused unique aggressive XAUUSD rate fluctuations in the recent trading hours.

So, it is expected to see more similar stimulus reactions by other major central banks to respond to that materialized corona virus outbreak.

BOE looked having tighter rooms to stimulate the economy further fearing of inflation rising at this current critical economic stance following Brexit.

From another side, The departure of the fiscally-conservative treasurer Javid is still weighing down on the odds of having more monetarily steps to boost the economy, as the new adopted reflation policies will take that role in the coming months to raise the trust in the UK economy by spending on transportation means, roads, generally on health care and particularly on COVID-19.

While it is widely expected to see action next Thursday from the ECB side, after these previous actions by other central banks paved the way to it to take further easing actions to raise up the inflation levels and support the current fragile EU economy tilting to the downside.

The ECB seems also not ready to wait longer for the EU governments to boost the economy by adopting fiscal reflation plans, After asking for these plans several times since the previous ECB president Mario Draghi leadership.

While the current EU countries fiscal stances in EU are still generally tilting to austerity because of the debt crisis in EU which caused major political changes in EU, after about a decade of adopting austerities measurements.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

8th January 2020 - The risk-off mode has been given extra momentum

mail@fx-recommends.com (Walid Salah El Din) — Wed, 08 Jan 2020 03:30:00 +0000

The Gold Jumped easily above 1600 per ounce and also WTI soared above $65 per barrel, as Dozens of ballistic missiles have been fired against United States military and coalition forces in Asad and Erbil bases by Iran for the killing of the top Revolutionary Guards commander in Baghdad Qassem Soleimani who has been just buried, following several funerals of him in Iraq and Iran looked ritual, huge and meaningful showing that a retaliation is coming no way.

Now, We are waiting for Trump's night address, after his current meeting with his appointed security team and advisors.

I should remind you that Iran’s Ayatollah Khamenei said severe retaliation awaits Soleimani’s killers.

Trump said the U.S. had identified 52 Iranian sites for hitting, if Tehran retaliates over its slain general Qassem Soleimani.

Trump vowed to slap sanctions on Iraq, if U.S. troops were expelled from the country, after Iraqi lawmakers voted to expel US forces from the country which is not in need to be a battlefield of new confrontations.

The European leaders are all working for calming down and restore back the limits on Iran enrichment of uranium on 2015 agreement which allowed to Iran to export its oil production freely , before the US withdrawal from it.

Trump can make his threat tangible and can also swallow his words, if there are no enormous numbers of causalities and deaths.

But the unity of NATO is threatened as some countries are less willing to be involved in a war there.

NATO fought against ISIS with Iraqi troops and Kurds in Iraq and Syria and also it is existing helping to maintain security in this very rich oil area of the world against many threats such as Iran which threat clearly from time to time of blocking the oil supplies from this hot area.

So, the NATO troops are forming also support to Arabian countries such as Kuwait, Saudi Arabia and Emirate. They are the main blockage of war there, After the removal of Saddam who was forming a limit against Iran and had to be replaced by who can play his role, after the falling of his regime.

So, the withdrawing of NATO is not an easy decision to be taken as it can have severe consequences and threat the global economic recovery the world lives in currently.

USDJPY is now struggling to hold above 108 because the demand for the Japanese yen increases amid the risk aversion sentiment as it has the lowest financing cost.

The demand for Bitcoin as a safe haven crypto currency away from the geopolitical concerns rose significantly during the Asian session reaching $8437.5, while UST 10yr yield is diving now below 1.75% ahead of Trump's address.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

6th January 2020 - The quick responses can be enough for escalation

mail@fx-recommends.com (Walid Salah El Din) — Wed, 08 Jan 2020 03:29:00 +0000

Protesting against the Iraqi government in the strict green region which is having also the US Embassy leaded to sizing and compounding around the embassy ended shortly.

The sizing has been followed by assassination of Iranian military commander in Iraq drove the Iraqi Parliament to vote against the US military existence in it has been replied by unseen sanction threatening by Trump against it, amid series of escalating exchanged hostile threats between US and Iran sent the oil prices up with the demand for safe haven.

The Iranian government said during the weekend that it could signal end of the 2015 agreement to have no limitations of its nuclear program including its uranium enrichment capacity and production.

These are the most recent events follow which ended to the current risk aversion sentiment which drove the gold prices higher to reach its highest level since Apr. 7, 2013 touching $1587 in the beginning trading hour of this week.

The demand for safer haven sent UST 10yr yield down below 1.80% level, after it was above 1.90% before the assassination of the Iranian military commander in Iraq.

As the markets were focusing in the ending days of 2019 on the Sino-American trade deal phase one successfulness to support the global economy and avoid lingering trade war between US and China which will lower import tariffs on over 850 products, including frozen pork and frozen avocado starting from this new year beginning and also from July. 1, it will lower the import tariffs on some information technology products by God's will.

From its side, PBOC decided by the beginning of this new year to cut the Reserve Requirement Ratio by 0.50% to boost the economy by 800b Yuan lending liquidity.

The Fed recent meeting minutes release have shown also last Friday its continued care of boosting economic activity and its language shows that it is to hold for while or cut again later, if needed and the tendency to hike is not yet in place for talking seriously about it, as long as the inflation is at this current levels below its 2% yearly target.

I guess that there will be greater appreciation of the geopolitical concern anyway in this new year from the Fed's side and the markets as well by God's will.

This appreciation can be cool for gold which was rising even during the equities markets ascending by the end of last year due to the Fed’s balance sheet widening which reached 4.166b in the ending week of last year, comparing to 3.761b has been reached in Sep. 4, after squeezing of it started in the week ending on Jan. 14, 2015, after reaching 4.516b.

The Fed's balance sheet widening pace was one the most important reasons why the Gold was rising in the last weeks.

USDJPY is now struggling to hold above 108 because the demand for the Japanese yen increases amid the risk aversion sentiment as it has the lowest financing cost.

The demand for Bitcoin as a safe haven crypto currency away from the geopolitical concerns rose to reach $7564, after it was trading just below $6850 before the assassination of Qassim Suleimani which sent also S&P 500 future rate down for trading close to 3010, after scoring all times high at 3262.47 in the early hours of last Friday.

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

4th December 2019 - The fear of Sino-American trade dispute escalation revived the demand for gold

mail@fx-recommends.com (Walid Salah El Din) — Wed, 04 Dec 2019 07:21:00 +0000

The investors' worries about the trade negotiations future between US and China increased significantly containing the market sentiment, following the U.S. House members voting to impose sanction against Chinese officials for their human rights abuse, after the US Senate unanimously passed a bill aimed at protecting human rights in Hong Kong.

Trump's administration has previously put visa bans on Chinese officials linked to the mass detention of Muslims in Xinjiang province, Trump has actually warned that he is to impose more tariffs on China if talks failed.

The demand for safe haven increased sending UST prices higher, as Beijing is expected to take action soon and retaliate against this resolution, especially, if there could escalating by raising U.S. tariff on Chinese goods on Dec. 15 as scheduled previously, before the trade talks advance to form a phase-one trade deal containing all what the 2 side reached.

The US equities indexes managed to correct to the downside, after continued creeping up sent them to all times highs by the end of last week, following US and Chinese officials reference last Thursday to that the phase-one would feature pledges to roll back tariffs on each others’ goods in the future phases.

While The greenback was still negatively impacted by the dovish release of Nov US ISM Manufacturing index which sparked speculations of having more interest rate cuts to come in US sooner than later to prop up this sector.

GBPUSD which is waiting for an outright Tories' victory supported by Nigel Farage's Brexit Party is now trading close to 1.30 and EURUSD could rise for trading above its daily SMA100 close to 1.1075, after consolidation near 1.0000 psychological level, while USDJPY is struggling now to hold above 108.50 as the demand for the Japanese yen increased as lowest cost financing currency amid this risk aversion sentiment.

The dovish market sentiment sent S&P 500 future rate to 3069.86, before easing of the downside momentum ended to rebounding to 3093.17 currently, while The gold could have easily a leg up reaching $1481.71, while Bonds yields were diving.

While the oil prices are still astray vacillating between the manufacturing activity weakness in US and the optimism about the manufacturing improving in China, after Caixin China manufacturing PMI was able to rise for the fifth consecutive month reaching 51.8 in November.

And in the same time, we find Russia’s Central Dispatching Department of Fuel Energy Complex showing crude oil exports decreasing by 4.2% in November 2019 Year on Year to 20.916m tones, we see also EIA says that U.S. crude oil production averaged 12.9mbd last week, up by about 1.2mbd Year on Year . EIA expected also that U.S. total crude oil and petroleum products net exports are to average .75mbd in 2020 comparing with.52mbd net imports average in 2019.

While most expectations are referring now to a decision to hold the current output cuts at least until June 2020 with no deeper cut, when OPEC and OPEC+ members are set to meet next Friday in Vienna.

God willing, the markets will be also tuned next for the release of US Nov non-Manufacturing ISM index later today to know whether or not the manufacturing sector weakness could spill over the service sector.

The worries about that eased down considerably following the release of Oct non-manufacturing ISM which has shown rising to 54.7, while the consensus was referring to 53.5, after slide in September to 52.6 reaching the lowest level since August 2016.

But The Employment Index of NOV ISM Manufacturing could actually spark worries about the labor market due to its retreating to 46.6 from 48.2 in October, as The manufacturing sector accounts for nearly 12% of the US economy and 8% of the labor market which will release its report of November by the end of this week.

Now, we wait for Nov non-Manufacturing ISM to show retreating to 54.5, after US ISM Manufacturing index shocked the markets in the beginning of this week by setting back to 48.1, while the consensus was referring to further improving to 48.3, after deterioration to 47.8 in September to record its lowest level since July 2009, following 6 consecutive monthly slippages since rising to 55.3 last March.

After holding around $1460 per ounce for more than 2 weeks, XAUUSD could extend its rebounding from $1445.65 to $1481.71 yesterday.

XAUUSD is having now closer existence to its daily SMA50 and its daily SMA100 which are moving just above it.

XAUUSD is trading now in its day number 11 of continued being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1452, after it could form a higher low at $1450.19 to hold above $1445.65 low of last Nov. 12.

The daily chart of XAUUSD shows that its RSI-14 is now at a higher place inside its neutral area reading 54.854.

XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its overbought territory reading 86.904, leading to the upside its signal line which is lower inside the neutral area reading 74.569, after positive crossover just inside this same area.

Important levels: Daily SMA50 @ $1482, Daily SMA100 @ $1486 and Daily SMA200 @ $1402

The Closest Experienced S&R:

S1: $1445.65

S2: $1381.82

S3: $1319.90

R1: $1519.54

R2: $1535.72

R3: $1557.02

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com

5th November 2019 - Re-evaluation of the interest rate outlook in US

mail@fx-recommends.com (Walid Salah El Din) — Wed, 06 Nov 2019 04:55:00 +0000

The gold came under selling pressure, as The trade war de-escalation optimism and the improving of US service sector could spark re-evaluation of the interest rate outlook in US.

While the investors' risk appetite remains boosted by the upbeating earning season in US and the relief of signing a phase 1 trade deal between US and China soon containing what the 2 sides could reach until now in spite of having no agreed where yet to sign this deal!

The worries about spilling the manufacturing sector weakness over the service sector eased down considerably yesterday following the release of Oct non-manufacturing ISM which has shown rising to 54.7, while the consensus was referring to 53.5, after slide in September to 52.6 reaching the lowest level since August 2016.

UST yields curves have been all boosted, as the speculations of having no further interest cuts this year rose significantly, as the economy looks in less sake of further stimulations from the FOMC, after it had already done in the previous 3 meetings of its members.

Actually, The Fed seemed really reluctant to send a signal about easing again in December refraining from hinting that further accommodation is needed to be satisfied by just telling that The Fed is committed to supporting the economy.

Fed Chair Jerome Powell messages during the press conference following the FOMC meeting were also mixed, as he said that only a "material reassessment" to the outlook will change the Fed's path of interest rates and in the same time he said also that only a significant rise in inflation would trigger a rate hike.

Fed Chair Jerome Powell has said too that manufacturing and investment are falling, but the consumer-facing companies are reporting that shoppers are doing well and the consuming sector remains unaffected by any slowdown elsewhere.

The FOMC recent projections which have been released following the members meeting last September have shown also that only 7 of 17 officials saw the need for further 0.25% cut by this yearend "and that has happened by the end of October", While there were no members' forecasts for more than one rate cut this year.

The greenback became more attractive by the rising speculations of having no further cuts this year, while the some speculations reached that there could be no more cuts in the current “mid-term policy adjustment”.

As what The Federal Reserve Chairman Jerome Powell mentioned following last July 31 meeting first cut since 2008, when he warned against expecting long U.S. monetary easing cycle naming that cut “mid-term policy adjustment”, before saying following last Sep. 18 cut "it was insurance against ongoing risks".

The gold has been in balance trading near $1500 per ounce, as the monetary easing tendency was offsetting the desire of loading more risky assets as the Trade tension between US and China is easing down.

There was no odds of tightening in the foreseeable future at all and the easing was running on with no sign of halting yet, But now most of the investors are downplaying the odds of having further cuts at least soon in US.

The trade war fear is at its minimal level with also the fear of hard Brexit with no deal, after extending article 50 working to the end of next January and that what Powell said exactly after cutting the interest rate last week concerning the global economy that "uncertainty is lower following Phase One of the trade deal and the significant drop in the chances of a no-deal Brexit".

UST 10yr yield is now near 1.84% after diving to 1.6684% following the release of US labor report of October last Friday, While gold is trading close to $1485 per ounce, after reaching $1515.96 per ounce following this same figure.

EURUSD is now trading near 1.1070, while the markets seem getting ready for more dovish comments from the new ECB president Christine Lagarde to pave the way for further easing actions to raise up the inflation levels and support the current fragile tilting to the downside EU economy which is in need for adopting fiscal reflation plans, as the previous ECB president Mario Draghi indicated, before leaving his Office.

GBPUSD retreated also to 1.2858, before stabilizing near 1.2880 during the Asian session, while the markets will be watching next BOE's decision eyeing on new info about BOE's Chief Mark Carney future as his term ending will be at the end of January too by God's will.

Despite the current lower odds of leaving EU with no deal, BOE's Chief Mark Carney may repeat again his warning about The hard Brexit threat and its impact on the banking and financial sectors.

As UK is set to suffer longer from low certainty about its political and economical undermining confidence in business spending till the end of next January, amid the current global economic slowdown because of the trade war worries which are weighing down on the economic activity in UK as many other industrial countries as it can lead to much lower Yuan exchange rate hurting their exports.

MPC is expected to leave the benchmark interest rates unchanged at 0.75% holding unchanged BOE’s APF at Stg435b keeping its re-investing cash flows associated with the redemption of the gilt held on the Asset Purchase Facility.

Following another failure to rise above $1520 per ounce, XAUUSD come under increasing downside pressure drove it again down below $1500 psychological reaching 1479.66, before residing for trading currently near $1485.

XAUUSD yesterday increasing downside momentum drove it to be now in its second day below its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1517, following upside down reversing yesterday on reaching 1479.66 per ounce.

XAUUSD lost again its existence above its daily SMA50, but it is still underpinned over longer range by continued trading above its daily SMA100 which has become at the nearest place to the trading rate since last May. 31 crossover.

The daily chart of XAUUSD shows that its RSI-14 is now at a lower place inside its neutral area reading 45.329.

XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its neutral territory reading 36.438 leading to the downside its signal line which is higher reading in the same region 61.572, after negative crossover inside the same area.

Important levels: Daily SMA50 @ $1481, Daily SMA100 @ $1409 and Daily SMA200 @ $1351

The Closest Experienced S&R:

S1: $1473.97

S2: $1458.93

S3: $1399.40

R1: $1519.54

R2: $1535.72

R3: $1556.83

Global Market Strategist

Walid Salah El Din

Mob: +20 12 2465 9143

E-Mail: mail@fx-recommends.com

http://www.fx-recommends.com