Europe Ahead: Mixed market sentiment fuels the relief rally as focus ok U.K. jobs and debt sales that will temper gains

The market sentiment remains mixed and trading is still choppy, as last week?s losses were followed by a relief rally with the start of the week and likely not to be sustained as the focus is on the upsides while the negative pressures continue to rise.

We saw investors react positively to data from Chine yesterday as the May industrial production slowed by less than expectations and retail sales slowed slightly, and for once, investors did not focus on the 5.5% rally in inflation, the predominant concern for the nation and the globe! The hours proved us only right as the relief rally was not much troubled with the PBoC?s decision to raise the reserve requirements yet again!

The sentiment continued into the European session and sterling held its grounds and continued the correction after inflation remained steady in May at 4.5% in line with expectations. The data were alarming to me, especially with the drop in core inflation, assuring that food and energy prices remain the eminent pressure and that the sluggish domestic recovery and rising capacity is pressuring prices, yet the headline is not moving and that is worrisome as growth is rapidly slowing.

Data today from the United Kingdom is expected to reflect more weakness with rising jobless claims by 6.5 thousand following April?s 12.4 thousand. Unemployment in the three months through April is expected to have held high at 7.7% assuring the soft economic status in the United Kingdom.

Is the market flowing its course its week, surely not on fundamentals, yet on the relief needed as the general outlook has not concretely changed for us to say OPTIMISM is back!

We can see some sense returning to the market and the losses for the sterling on the weak news and for the euro on the debt crisis are likely to return. The volatility remains high and the euro rose to compensate some of the losses as the debt crisis outlook has not changed with no new resolution on the Greek aid.

The euro rose on the successful debt sales in the area from Greece and Spain yesterday, especially as they followed S&P?s move to slash Greek debt rating to the lowest in the world citing heightened likelihood for default, as they expect unfavorable terms in the new bailout and any swap or bond maturities extension will also account as default!

We have a busy day ahead of us today, especially with the United States taking the lead with heavy data from inflation to industrial figures that shall keep the markets on the edge all day.

We will keep our eyes yet focused on the UK jobs figures and the EU finance chiefs as they discuss the Greek bailout on hopes they can stem the rift with Germany and indeed limit the involvement of the private sector to ?voluntary? and favorable basis.

Source: http://www.fxstreet.com/fundamental/analysis-reports/top-fundamental-stories/2011-06-15.html

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