/24-7PressRelease/ - DOUGLAS, ISLE OF MAN, May 16, 2008 - The past week had the potential to be explosive. Central bank meetings in the UK and Europe had traders licking their lips with anticipation for the
possible outcomes of the meetings and the potential volatility they could
bring. Sadly for volatility lovers, the week came and went with little
significant turbulence. The FTSE ended the week up almost 150 points. The Dow
Jones Industrial Average was not so lucky, losing more than 250 points; most
of it on Friday afternoon, when the world largest insurance company AIG
announced it will be seeking more then 12 billion dollars in new capital.
The new week brings with it a slew of data from UK and Europe; the common
theme being inflation. From Consumer Price Index to Producers Price Index,
traders will be looking for a number that's on the higher side of
expectations, as oil prices are at an all time high and largely to blame for
the inflation run. As it was mentioned last week in the EU bank speech that
accompanied the rate decision, the main reason why the decision was taken not
to lower interest rates, was the great concern that doing so would cause
inflation to spiral out of control. On the US side, the data will focus more
on retail sales and the health of the manufacturing industry. Last week,
Wal-Mart and a few other big box retailers announced that their 'same store'
sales were higher, possibly indicating that consumers are shopping more. If
this is the case then perhaps this could be the stimulus that the US
president was talking about, or maybe it could be explained by consumers
hitting the shops to spend their tax refunds.
Last month the Euro/Dollar hit an all time high near 1.60, since then the Euro
has been in a freefall situation, giving back more then 5 cents. Some
research among retail foreign exchange merchants shows that the Speculative
Sentiment Index is now showing more of a lean towards a weaker Euro. This is
the 3rd week that the SSI has been indicating this.
With that in mind, the play of the week is as follows: We are looking for the
Euro to weaken further against the US dollar, or at least not test the all
time high levels hit earlier last month. A no touch on the Euro/USD maturing
May 29th 2008, with a strike price of 1.60 could return 10% ROI.
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