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Equity market rally sustains...

Yesterday we had another firm session in Asian stock markets and a steady session on the Dow Jones continuing the rally from the back end of last week. Fed Chairman Ben Bernanke provided an upbeat assessment on the US economy commenting that a recovery could commence this year, we also had positive feelers from Barclays declaring that 2009 so far had been positive. US industrial production fell for the fourth month running in February - dropping by 1.4%. The monthly decline was slightly worse than expected and was driven lower by warmer temperatures across the US, which slowed the output of utilities. So although the rhetoric from Bernanke & co may be upbeat the data is yet to correlate…the market will focus upon the Fed rate decision tomorrow night and what else may be in store to help boost the economy.

It seems the pound at the moment is starting to benefit from the MPC and government’s co-ordinated and pro-active response. Both the pound and the euro made gains against the dollar in trading today as financial stocks continued to rally. Investor sentiment was improved following the G20 meeting which signalled that IMF resources would be doubled. The GBP/EUR rate today has been caught in no mans land as both currencies gained against the US dollar and the Yen. With increased resources for the IMF, the euro should improve as this will allay concerns in the banking sector in Eastern Europe- recent worries over the region have caused negative sentiment for the euro. Short term we are looking at a range of 1.07- 1.10 and the pound will struggle to breach 1.10 on the upside as the euro is holding just under 1.30 against the US dollar and looking bullish following the G20 meeting.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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