FOREX TRADING

After yesterday’s strong rally, Intel added more signs after the market close with strong results and Asia today second the positivity with accelerating growth in Singapore. UK also reported a drop in unemployment while industrial production continued to expand in the euro area despite missing forecasts.

The market nowadays is all about the sentiment. Surely if you look at technically it is merely an upside recovery following the slump, yet fundamentally it is called unwinding of persistent fears. Investors have eased their expectations for a full scale ‘double-dip recession’ and now not full optimistic yet see that the global economy is undergoing a normal fragile and volatile recovery following the worst crisis since the Great Depression.

Starting off with the European figures today, the sigh of relief was from the United Kingdom. The UK economy which as recent as the fourth quarter of 2009 emerged from the longest recession on record, confirmed it with an expansion in the first three months with 0.3% expansion.

The ONS reported today a drop in unemployment as the recovery started to show effects on the nations. According to the ILO standards in the quarter through May, unemployment declined for the first time since January to 7.8% from 7.9% at 2.47 million.

The number of people claiming unemployment benefits in June dropped by 20,800 exceeding slightly the projected drop of 20 thousand, following 31,100 drop in May revised from the original estimate of 30,900. The claimant count rate in June dropped as expected to 4.5% from 4.6%.

Surely the recovery is uneven, but again referring to my favorite statements of the period, according to ECB’s Trichet, investors are over pessimistic and the fundamentals do not reflect the double dip!

The debt crisis indeed is a major ache to the global recovery and a constant agonizing beast for investors. Nonetheless, the recovery is waning and may be unsteady, but all data assure ongoing expansion across the sectors.

For instance, the euro area today reported rising industrial production in May by 0.9% meeting the previous month’s revised expansion and rising on the year by 9.4%. Though the data were below expectations for an expansion by 1.2%, but, if we are expecting a relapse into a deep recession, expansion should not be at all the provided clues.

Asia confirms the ongoing recovery, and surely not just as Europe, but on a global scale, all expectations are for the developing nations and the Pacific in particular to help in lifting global growth. According to the latest projections by the IMF the global economic expansion is to be above expectations after a strong start for the year.

This year was battered with debt woes and it weighed negatively on the sentiment and unwound the faith the market had in the euro and its economy. The euro area is suffering the deep spending cuts and under pressure from the market but the bailout measures so far have gradually rebuilt the confidence in the market, especially after a strongly successful bills auction yesterday from Greece.

Unwinding of negativity

Investors were too pessimistic most of the second quarter, and as we are starting to see the signs of continued growth in the quarter, starting from corporate earnings, investors have started to reconsider their assessment for the outlook.

The US earnings season started with a bang. Though the case is seemingly similar to that we saw in the first quarter, where analysts were too pessimistic which is why earnings were surprisingly strong, but all we are focusing on are strong earnings, sales, and profits.

We see that this unwinding and readjustment will help the bulls lead the market. Equities surged yesterday from Europe to the US and Asia ended strong today and we expect European shares to follow suit.

Indices are soft this morning and marginally changed, though we see that they will bounce higher into the session as the market is correcting yesterday’s rally.

Strong sentiment for now it is, just the silver-lining will be the GDP for the second quarter, and the performance in the third. Strong earnings from companies without spending or hiring will be capable of sending the market down again to continue the pessimism it started the year with, so do not be overjoyed just yet and too confident of the rally…