The upcoming week should prove that the global economy is slowly recovering from the US mortgage crisis. The S&P 500 raeched a new record all-time high last week and the American dollar is retreating from a historic low against the euro.

Optimism is back on the global currency and equitites markets. The dollar has finally retreated from its all-time high at $1.4280 against the euro, which it reached two weeks ago. It seems that the market is pricing in expectations that the US mortgage crisis will end soon. The impulse for further strenghtening of the dollar came from macroeconomic publications. Non-farm payrolls were at 110,000, better than the 100,000 forecast. But what really gave the dollar a boost was the correction of last month's non-farm payrolls figures, which were revised up from -4,000 to +89,000.

This week investors will certainly get a couple of interesting macroeconomic reports. On Tuesday, the Federal Open Market Committee will announce the minutes from its meeting when the federal funds rate was cut by 50 basis points. The minutes provide detailed insights regarding the FOMC's vision of the US monetary policy. Very important for traders will be Thursday. European Central Bank’s President, Jean-Claude Trichet is expected to speak. Also, the Trade Balance reports for the US and Canada will be published. Traders betting on New Zealand’s kiwi will pay attention to the Retail Sales publication. Of course, Friday will bring important financial information including the American PPI and Core PPI reports as well as Core Retail Sales. PPI is expected to increase by 0.5% against last month’s reading of -1.4%. Core Retail Sales are forecasted to increase by 0.3% while last month they declined by 0.4%. That may be another signal that the US economy is not doing so bad. Also on Friday, the University of Michigan Consumer Sentiment Index, which tracks consumer attitudes concerning both the present situation and future expectations, will be published. Polish investors will need to follow international news since only the M3 Money Supply in Poland report will be published on Friday.

Global risk aversion is declining. It seems that investors are willing to go shopping again. The Warsaw Stock Exchange’s WIG20 shoot up in the morning to over 3,800. Good news from the US are affecting Polish investors. This week in the US many companies will announce their quarterly reports. The market already discounted information that some of them will experience losses or have worse results due to the mortgage crisis. It can only be better from now on. The worlds’ risk assessment currency pair, the USDJPY, is finally rallying, proving that investors are more willing to take risks. It is probable that the Polish Złoty will climb. Since yesterday both the EURPLN and USDPLN are declining. The upcoming weeks should also show how the interest rate cut in the US affected the market. In my opinion, improvement will be seen.

Adam Narczewski