Archived IMT (2011.03.03)
Euro rallies across the board on further PMI strength, while GBP is pressured by the lowest services PMI in 4 months. Eurozone Feb services jumped to 56.8 from 55.90 to hit its highest since Aug 2007, while the prices paid index rose to 52.8 from 49.8. Euro gains in anticipation of a hawkish press conference from JC Trichet, who will seek to open the door for a possible rate hike as early as May but MAY NOT necessarily go for the actual hike in rates. Central banks often aim at managing inflationary expectations via rhetoricand therefore do not always follow-up on their words. This was the case of the FOMC in Spring 2007 when the US central bank aimed at avoiding further dollar declines but was unable to raise rates in light of the broadening cracks in the sub-prime housing market. EURGBP regains 0.85 and could retest 0.8530s but is expected to run out of steam at the 0.8580 resistance, which marks the trendline extending from the Oct 2010 high. Im still bearish in EURGB to retest 0.8380 and 0.8180s. In the case of the US services ISM, markets will watch the PRICES PAID index for the latest on inflationary pressures. NZDUSD downtrend intact, with trendline from Feb 2 trendline holding any rebound at 07530.
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