Long term investors should wait for a correction in crude oil prices as the risk to return ratio is not that great.
The European central bank (ECB) may not cut interest rates in 2008 and there is a slight possibility that it may raise interest rates towards the close. Expectations that the Fed will raise interest rates in December has been fully factored in by the markets. Even if the Fed raises interest rates in December and the ECB also raises interest rates in the same time then interest rate differentials will remain the same. So the euro will continue to remain firm against the US dollar, but the pace of gains will be very slow. The US dollar has weakened against all the currencies as higher crude oil prices will delay the US economic recovery. In the short term the US dollar will gain against the major currencies if and only if either growth differentials narrow or interest rate differentials narrow. Till then the greenback will trade with a softer bias in the medium term.
Lehman brothers has said that it will cut 1300 jobs globally. Once again firing news has started to come up from the financial services sector including one from Morgan Stanley in the past fortnight. Whether these jobs shift to Indian knowledge processing (KPO’s) firms remains to be seen? If more firing continues by the financial services industry, one should expect US May payrolls to remain in the negative zone and renewed selling pressure on the US dollar.
SILVER -- JULY FUTURE
Silver can target $2125 in the short term as long as $1580 holds and momentum supports it.
MCXARUN
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