There’s finally some light at the end of the tunnel for Egypt as talks are held between parties to come to an agreement over the eventual transfer of power.
It’s understandable to see Mubarak trying to cling onto his position as he’s run the country for the last three decades. Anyone who’s been in control that long would find it hard to relinquish power particularly when things have moved so fast with the uprising materialising from what started in Tunisia. His resistance to stand down will go someway to protect other regimes that are susceptible to similar social unrest and for now a degree of normality is returning to the lives of the Egyptian people.
The effect on the financial markets is muted apart from crude prices which have seen a sharp correction to the downside. The FTSE is just struggling to make any ground as investors fret over this week’s BOE interest rate decision on Thursday where there’s a small chance that they could raise rates. Sterling has appreciated in the last few days as expectations for a rate rise soon have increased, but this Thursday is too early. Nonetheless the threat is there and as copper prices hit a new record high inflation concerns are at the forefront of traders’ minds.
The UK index is hovering around 6000 and has recovered well from the retracement it saw in the latter part of January, but it still is yet to break through to new highs and UK investors just seem to be sitting on their hands as they watch other major indices break their recent highs to new two and a half year ones. The Dax and Dow continue to grind higher and the Nikkei reached an eight month high on Friday.
Clients are still opposing the strength on the US indices and have been selling the FTSE this morning too. It looks like the higher we get the shorter clients become in the hope that there’ll be a decent follow through of any retracement, which as yet has not materialised.
Although the headline figure of Friday’s NFP was much worse than expected the sharp decline in the rate of unemployment to 9% provided the dollar with some decent strength. EUR/USD saw some serious volatility over the figure initially rallying before quickly reversing and ending up back below 1.3600. This morning the rate is at 1.3595 and the support levels to watch are 1.3540 and then 1.3500 and 1.3440 is quite a major support level. Resistance in the near term is seen at 1.3620 and then 1.3660. The recent weakness though is starting to look ominously like the rally that commenced a month ago could be over.
Cable didn’t suffer quite as much as the euro but the dollar strength still took it lower. GBP/USD is at 1.6160 so traders will be watching carefully 1.6030/00 to the downside and 1.6235 to the upside.
Gold also saw its fair share of movement over the big US number and initially rallied before reversing the gains and settling just below 1350. This morning the precious metal is at 1349 so to the upside 1362 and 1370 are levels the bulls will be eying up meanwhile 1330 and 1324 are near term support.
Crude traders witnessed how markets can move aggressively in the opposite direction to a trend. Brent saw the profit taking bring it back below $100 and Nymex has brought back below $90. As pressure mounts on Mubarak to step down as President of Egypt the more crude more could correct downwards to levels seen before the crisis. This won’t mean however that the longer term upward trend for crude prices is over and it’ll take a far greater retracement before we can say days of $100 a barrel are over. This morning Brent has just crept back above $100 and is at 100.10 while Nymex is lower by just 30 cents to 88.75.
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