USD

EGYPT: Headlines about internet and cellphone services being turned
off and military vehicles on the streets in Cairo are adding to market
jitters about Egypt. Ashraf Laidi of CMC Markets says the market is
concerned that any fall of Mubarak's ruling party might "endanger the
Suez Canal pasage of oil and trade into the Mediterranean and Europe."
One oil analyst says that, so far, crude is seeing only a modest lift
due to Eqyptian specific concerns. "If unrest spills over to an OPEC
member - Libya or Saudi Arabia, that's going to be major news," he says.


aSHRAF

USD STABILISES on 3.2% US Q4 GDP emerging from primarily from a healthy combination of rising consumption (PCE +4.45% highest in 4 years) and improved net exports (next exports +8.5% from 6.8%). UNIV OF MICHIGAN 1-year inflation expectations index was revised to 3.4%, its highest since Oct 2008 4%, showing a clear pick up in expectations from the 2.2% low reached in September. This suggests that annual core PCE price index (Feds preferred inflation measure) will most likely have bottomed at 0.8% y/y in January and should give the FOMC hawks (Plosser & Fisher) reason to dissent starting in March.

USD initial inability to follow-up on post GDP bounce was partly attributed to Moody's report indicating a potential revision of US credit rating w/ in 2 years. But the aforementioned technical exhaustion dynamics underline that the US index remains well supported about the all important trendline of 76.


Ashraf