PIG’s debt crisis and China took the spotlight from Fed's quantitative program last week. The US Dollar was boosted higher on risk aversion in the early part of the week but reversed as sentiments stabilized.
After initial refusal, Ireland finally signaled that they will accept bailout from EU. Irish Central Bank chief Patrick Honohan said that he's expecting a package worth "tens of billions" of euros to help the nation's banks, which were battered by the its property slump. EU, IMF and ECB officials are studying banks' books and would some sort of agreement might be reached soon, probably this week. The news helped Euro and Pound staged broad based recovery during the latter part of week. Despite the Irish “bailout” Eurozone debt crisis story is not expected to end with the markets will start to target Portugal. Also, note that Greece revised up its deficit in 2009 up to 15.4%f GDP, nearly 1.8% higher than prior forecast of 13.6%. Projection for 2010 deficit was revised up from 7.9% of GDP to 9.4%. Eurostat also revised up Greece's debt level figure of 2009 from 115% of GDP to 127% of GDP. So, Greece could be in queue again next to Portugal and the story could be never-ending.
By the end of the week, dollar recovered as the market sentiments was also weighed down by fear of more tightening in China. China raised the so called bank reserve requirement ratio by 50bps to "appropriately control" credit and loans. This was the second reserve increase in two weeks as inflation is viewed as a serious threat to the Chinese economy. There are still speculations that rate hike is imminent, in addition to the current measures.
GBP/USD has been on the downtrend since early November and last week fall found support at weekly Pivot Support S1. Then the pair corrected upward to 50% weekly fibo and by last day of the week it moved downward toward the previous week low and the 1.5950 level.
The pair intraday sentiment is still bearish with resistance at 1.6093. A break below 1.5950 could push the pair to below 1.5750 .
