For over a decade, it was a very common practice to discuss and quote 9-10 pct Chinese growth in the global financial market. After 2008 US housing crash, USA considered global growth engine, lost its gloss and China and India sharing 40 pct of the global population amongst themselves was quoted as example as being leading Asian countries to support the global economy, as Asia was then growing by over 5 pct.
During this period Europe was getting exposed due to extraordinarily high debt to GDP ratio caused by credit crunch and lately it was at the verge of collapse, but Europe’s financial system including its banking system against all odds was well engineered by the European policy makers to find a solution through various bailout packages for small economies and lately came up with Euro 1 trillion LTRO support funds to rescue bigger economies at the cost of its future generation. This pool of money was made available after overcoming all economic norms and accounting rules.
Like many other oil importing countries, Indian economy too looks fragile due to global uncertainty and is suspect to rising global oil prices, which may not be easy to sustain if global oil price continues its climb by another $ 15-20 for next 6-12 months.
And yesterday, Chinese Premier Wen decided to throw his towel by declaring 7.5 pct GDP growth outlook for 2012 indicating that he intends to focus on higher quality economic development to concentrate on its domestic market.
From growth perspective, what is left for the global economy? Which country will act a growth engine? US economy is picking up, but is the pace enough to support global slowdown? Are we done with European woes? For how long are we going to linger on with the global mending polices? It seems cark started to appear in China. So is China going to burst soon?
Back to currencies, as market will be focusing on some of the important European economic data’s that will provide further clues that if Europe requires another rate cut or not. ECB official’s statement could also create some volatility in the foreign exchange market.
Euro @ 1.3207 = Euro should hold 1.3170-80 until European data, buying is prefer around current level for 1.3240. Apply STOP if 1.3150 breaks.
GBP @ 1.5858 = Cable is buy around 1.5840-50 with STOPS if 1.5820 surrenders for 1.5890.
GOLD @ 1703.90 = May see a test of $ 1710-12, but as long as stays below $ 1720, risk for test of $ 1695 zone.
Mar 05 - EurO & GoLD To RemaiN SofT - Mar 5-9