Friday 8 April 2011

Bonds volume picking up post ECB rate hike

Sources pointing out Spain doesn't need bail out, Greece will not need to restructure and Portugal needs reforms.

PGBs 3bp better, Ireland 5bp better and Greece flat.

EUR/USD sees decent rally in Asia


As the dollar sees general weakness (USD/JPY exception), underminned by the spectre of a US government shutdown.  Interesting to see that the Big German we mentioned scooping up overnight 1.4400 EUR/USD calls yesterday has hit pay dirt.  Clever Big German. Euro zone data today: 06:00 GMT: German trade balance for February expected 13.0 bln; current account 12.0 bln.  Exports +2.0%. Imports +1.0% 06:00 GMT: Bank of France business sentiment for March 06:45 GMT: French central govt balance for February European stocks set to open firmer; DAX and FTSE around +0.5%. 

Economic Calendar - 8th April 2011

Good Morning Traders,

Key events due at:

11:00GMT Canada Unemployment Rate (Mar) Consensus 7.7% Previous 7.8%
and Canada Net Change in Employment (Mar) Consensus 32.4K Previous 15.1K

12:15 GMTCanada Housing Starts s.a (YoY) (Mar) Consensus 180.0K Previous 181.9K

All eyes on the canadian dollar today! 

Forex: AUD/USD - holding above 1.0450, correction looms (Barcelona) - The Aussie hit 1.0507, new all-time high in its flotation era, before sinking 100 pips on Japan’s earthquake; despite the sell-off that was driven mostly by profit taking, a recovery to higher levels was seen in late US trade. Current price stays at 1.0450.

"Hourly chart has turned bearish with price capped below 20 MSA and momentum heading south, advancing a probable bearish corrective movement. 4 hours charts show 20 SMA still strong around 1.0400 now, with indicators aiming to regain the upside yet lacking definitions right now: pair needs to recover at least above 1.0470, to extend its bullish trend to fresh highs" said Valeria Bednarik, Chief Analyst at

Support levels: 1.0420 1.0370 1.0340, Resistance levels: 1.0470 1.0500 1.0550

Day Wrap-Up: Euro firm on ECB rate hike; Stocks struggle (Barcelona) - Asian session – Aussie strengthens as jobless rate falls below 5%

The Aussie roared ahead on encouraging jobs report. Unemployment rate fell to 4,9% after the economy added 37,800 new jobs. Broad-based gains were printed against all rivals, versus the Dollar, closing in on 1.0500, against the Kiwi, recovering 1.3450, while the Euro also pulled back wildly to 1.3650. EUR/USD tested 1.4300 on profit taking. USD/JPY was faced with heavy selling at 85.50. BoJ announced loan program for banks to lend to companies for post-quake reconstruction. Nikkei +0.5%, HK -0.25%.

European session – As expected ECB hikes, BoE holds

EUR/USD wobbled between 1,4260 and 1.4320 while Trichet came on stage to explain the ECB rate decision of hiking rates by 25bp to 1,25% as widely expected. He sounded slightly more hawkish, with analysts hinting the next 25bp hike to be in June. Traders read from his words more moderate further rate “normalization” going forward. GBP/USD found support at 1.6260 following a rate hold by the BoE. AUD/USD rallied to kiss 1,0500. USD/JPY held above 85.00. European stocks fell 0.50% on average.

American session – Japan quake, US budget standoff main focus

EUR/USD recovered 1,4300 handle. GBP/USD rose back above 1,6300. AUD/USD retreated off 1,0500. USD/JPY fell as lo as 84.60 only to regain 85.00. US weekly jobless claims fell to 382,000 from 392,000. The US Government resumed negotiations on the new budget, no agreement was reached. The House prepares a stopgap bill to allow funding to continue while talks unfold. A 7.4 magnitude quake hit Japan (Sendai), no new damage to nuclear plants reported. This latest natural disaster sent stocks lower, S&P 500 closed down 0.2% , while providing some minor relief to the Dollar. WTI oil broke $110/bbl. Gold made new record highs at $1,465/oz. US 10-year note 1 bp up at 3.55%. 

Forex: EUR/USD, resting at 1.4300 after ECB (Barcelona) - Almost unchanged since past Asian session update around 1.4300, pair fell following Trichet statement, exacerbating the fall on some risk aversion triggered by a second earthquake in Japan.

Bulls were able to regain the bid tone from lows at 1.4240, forcing a rebound late US trade towards the mentioned round number handle. “Slightly bullish yet with no enough momentum according to the hourly chart, pair needs to overcome 1.4330 to resume its bullish trend” commented Valeria Bedanrik, Chief Analyst at

Support levels: 1.4280 1.4250 1.4210, Resistance levels: 1.4330 1.4350 1.4385

Forex: GBP/USD, upticking still firm, rate above 1.6300 (Barcelona) - GBP/USD recovered from a low at 1.6250 after the BoE decided to leave rates on hold. Pair remains trading in a quite limited range between 1.6250 and 1.6340 with hourly indicators flat, giving no clues of further direction. Current quoting in the Asian session settles at 1.6315.

"4 hours chart shows indicators heading lower still above their midlines" points Valeria Bednarik, Chief Analyst at Adding that "while 20 SMA holds a strong bullish slope currently around 1.6280, lose of this last, could anticipate a break below mentioned 1.6250, pointing for a bearish extension towards 1.6200 price zone".

Support levels: 1.6300 1.6250 1.6220, Resistance levels: 1.6365 1.6400 1.6440

Forex: EUR/USD rallies to 1.4350; EUR/JPY up at 122.30 (Barcelona) - The European shared currency is flying higher in recent trade, testing key levels against its most direct competitors. It had been a quiet session so far, yet post fixing spikes have fortunately animated the velocity of printing.

EUR/USD has been able to kiss 1.4350 after surpassing marginally its former 20111 high at 1.4347. Selling orders were seen at the peak, forcing a quick retreat towards 1.4335/40.

EUR/JPY is another pairing reacting ferociously to the upside, moving from a low at 121.30 to make fresh session highs at 122.30. “Technical resistance at yesterday’s 122.55 high and stops are reported above 122.70" said Sean Lee at Forexlive.

USD/JPY has also been sent to higher ground, stalling at 85.30. GBP/USD trades near 1.6340.

Forex: USD/JPY on limited corrective movements (Barcelona) - Slightly lower, bearish corrective movements in the cross are still seen limited, after the pair fell to 84.50 strong static support zone yet managed to rebound towards 85.00 handle before the NY close. Presently price is unchanged in a slow Friday.

"Hourly chart shows price below 20 SMA that’s gaining bearish slope, while indicators are flat yet also below their midlines. 4 hours chart shows price testing 20 SMA just around current levels, with indicators heading also slightly lower. Risk to the downside after the latest earthquake, will depend on Nikkei movements" said Valeria Bednarik, Chief Analyst at

Support levels: 84.85 84.50 84.10, Resistance levels: 85.05 85.30 85.60 

Forex: EUR/USD makes it to 1.4400, up 0.70% (Barcelona) - Asian investors have turned their full attention to the Euro as the buying mood gathers momentum, riding prices higher to the extent that EUR/USD just touched the next big round number at 1.4400 after a sizeable barrier option at 1.4375 was pierced minutes ago.

So far in Asian trade, the Euro has completed a 100 pips upswing, taking the price from an open at 1.4300 all the way up to mentioned highs, presently consolidating gains at 1.4390. The slight hawkish comments from Trichet after the ECB rate hike along with fears of a Govt shutdown in the US have fueled the enthusiasm.

On the upside, next resistance is seen at 1.4440, while on the downside, 1.4350 should act as a value are to buy on dips. 

Forex: EUR/AUD trimming losses, away from 5-week low (Barcelona) - After being unable to make fresh new lows at 1.2900 vicinity early this year, EUR/AUD rallied strongly on anticipation of the rate hike campaign the ECB seems to have embarked upon, with April 7th marking the first of what may be a series of hikes this year.

The wild uplegs seen faltered abruptly mid last month around 1.4300 amid investor's incredulity to the large reversal from the Aussie, that sent price back towards 1.3600 support early this month.

In recent days, range bound conditions have prevailed yet since the bright jobs report released by the Australian Government yesterday, with unemployment rate falling to 4.9%, risk has shifted to the bottom side again, where the Aussie tested levels below 1,3600 briefly yesterday before being snapped back up into the range. Pair is on bullish tone at 1.3700 now in Asia.

From a daily perspective, a clear break to the downside may expose 1.3500 support ahead of 1.3400. Meanwhile, on the upside 1.3800/50 seems to be the next solid resistance.  

Forex: Asia sends Dollar south as US Govt shutdown is priced in (Barcelona) - With the option of having a US government shutdown being priced in by Asian traders, the Dollar was prompted by heavy selling over the past few hours. The latest reports are suggesting that the budget impasse between Obama, Reid and Boehner has failed after long talks. Euro is the major beneficiary.

EUR/USD remains trading at fresh 2011 high just below 1.4370, GBP/USD is picking up momentum towards 1.6360, USD/CHF dipped to 0.9130, AUD/USD is approaching 1.0500. USD/JPY is the only exception where dollar continued to add in recent gains, although the pair is off its highs now. Metals are also driving through new highs too. 

The German Trade Balance surplus tightens (Barcelona) - Destatis reported the German Trade Balance surplus was €11.4 bln in February whilst the Current Account surplus stood at €8.9 bln.

January's Current Account figure was revised to €7.1 bln. The Trade Balance surplus was recorded at €11.8 bln, market analysts anticipated an increase to €14.2 bln.

Forex: GBP/USD rally, might cap at 1.6400/40 - CharmerCharts (Barcelona) - Pound recovery from 1.5940 low last week has extended to 1.6400 where, according to Carol Harmer, technical analyst at CharmerCharts, the pair is likely to be capped by march high, at 1.6400 and trendline resistance at 1.6440.

The current rally is likely to be capped at 1.6400/40 resistance area, says Harmer: "Cable is in a good position to trade higher this morning, but we are looking limited initially to 1.6400 which is the previous March highs. We Also have a small trendline resistance point coming in at 1.6440 which should be the top of this immediate rally."

The potential corrective reaction, according to Harmer, should be contained by 1.6205/25 support zone: "We look for correction to hold between 1.6225 and 1.6205 over the next few sessions and this would give buyers a chance to come back into the market looking for further moves higher." 

Forex: GBP/USD, pushing against 1.6400 resistance (Barcelona) - The Pound has retraced the whole decline from March 22 to March 28, bouncing from 1.5930 to reach to 1.6400 resistance area, - 2011 high- under pressure ahead of the London session opening, as the Sterling reached 1.6405 high so far.

Above 1.6400 (March 22 high), the Pound night find resistance at 1.6460 (Jan 2010 high) and then 1.6500 (Psychological level). On the downside, support levels are 1.6315 (day low), and below here, 1.6255/60 (Apr 6/7 lows) and 1.6215 (intra-day level).

GBP/JPY retreat from 139.60/70 highs earlier this week found support at 137.85 low yesterday, and the pair bounced up on Asian session to pare loses and return to 139.60/70, 11-month highs, under pressure at the moment.

Asian markets up, Nikkei shudders after a new quake (Barcelona) - Asian markets have mostly gone higher on Friday with the Nikkei Index shaken after a new earthquake hit Japan, triggering panic on investors with the country still struggling to take control over troubled Fukushima nuclear complex.

The Nikkei Index dropped 0.6% on early trade, right after a 7.1 magnitude earthquake hit the North East area of the country, and bounced to 1.5% positive on afternoon trading in Japan, favoured after Fast Retailing Co revised upwards its net profit outlook after heavy losses over the last two quarters.

Australia, the ASX index advanced 0.4%, while Hong Kong Hang Seng Index added 0.6% and China's Shanghai Composite rose 0.4%. On the negative side, South Korean Kospi Index edged 0.1% down.

Euro rallies after ECB rate hike

The Euro has rallied across the board after the ECB hiked its benchmark interest rate fro the first time since mid 2008. EUR/USD rally from 1.4020 last week has extended to fresh 13-month highs above 1.4400. EUR/JPY regained 122.00 level.

GBP/USD has retraced the whole decline from March 22 to March 28, as recovery from 1.5930 area extended above 1.6355/65 highs to reach to 1.6400 resistance area, -the 2011 high- which s being tested right ahead of London session opening.

USD/JPY has remained trading sideways between 84.60 support area and 6-month high at 85.50, consolidating after having rallied from 76.25 lows on mid-March. 

Monday 22 November 2010

LME LATEST - Chinese 'pulling base metals' strings'

- Base metals were under pressure during Friday’s open-outcry sessions at the LME after a long week of extraordinary volatility, as China’s decision to raise interest rates sent commodities and equity markets lower.

- Traders on the floor of the LME were spooked by inaccurate information published by Reuters earlier in the morning, which mistakenly showed that the Chinese cut the base rate and not the reserve rate by 50 basis points - “A much bigger deal”, according to one LME trader. This news triggered a sharp $80 sell-off in copper of nearly one percent simply based on a false premise. “The markets are overreacting to everything at the moment,” the trader added.

- “I feel really manipulated by the Chinese,” a second LME trader said. “It’s as if we’re their puppets.” Markets have remained focused on what measures China will take to cool inflation, which is currently running at 25-month highs. Traders also cite worries that the Chinese will release unreported stocks of metal soon to tame prices.

- Copper traded at $8,391, almost flat with yesterday’s close, after trading above $8,500 earlier in the session. Aluminium traded at $2,294, down $20, while zinc and lead also recorded losses. The dollar weakened against the euro, meanwhile, to around the 1.37 level.

BULLION LATEST - Gold drifts to session lows after China rate news, euro cuts gains

 - Gold prices drifted lower during early afternoon trade on Friday, as the euro cut some earlier gains versus the US dollar, while China’s decision to raise interest rates contributed to send markets lower.
- Spot gold, which was caught in light profit-taking this morning, extended losses to a session low of $1,342.90 per ounce at one stage, down $17. It was last seen at $1,345.10/1,345.90 per ounce, still down $16.80. On the charts, the metal’s next support is at 50-day moving average of $1,340.
- The euro was trading at 1.3660 versus the US dollar, while markets remain focused on what measures China is taking to cool inflation, which is currently running at 25-month highs. The country’s central bank raised bank reserve requirements by a further 50 basis points after a previous increase two weeks ago. Lower inflation are negative for gold, usually seen as a good hedge against inflationary concerns. Investors were also awaiting fresh news on the potential Irish economic bailout.
- In other precious metals, silver was down 89 cents to $26.48/26.53 per ounce, while platinum fell $25 to $1,648/1,654 per ounce and palladium was down $9 to $693/698 per ounce.

LME LATEST - Copper and tin claw back lost territory, leave rest of complex behind

- Copper and tin recovered from the mid-day sell-off on the LME on Friday afternoon after news that China’s central bank raised banks’ reserve requirements for the second time in two weeks roiled markets. The rest of complex failed to attract similar buying, however.

- Copper traded at $8,460 per tonne, up $94, while tin was up $450 at $24,450. Copper volumes were high again, with more than 15,000 lots traded on LME Select. The rest of the complex was lower, however, with aluminium trading at $2,293, down $10, and nickel at $21,858, down $42. Zinc was flat, trading at $2,190, while lead fell $48 to $2,290.

- The Chinese move was largely anticipated by markets but traders are now looking for clues as to whether anything further will be announced over the weekend with respect to interest rates. “Even if we do not see any new moves by the Chinese, the fact remains that with each successive round of eventual Chinese tightening, corrections could come our way more quickly and will exhibit much greater staying power,” MF Global analyst Ed Meir said.

- This week, analysts at nine banks surveyed by Bloomberg News predicted that China will raise rates by the end of December, which could trigger further volatility in January 2011.

Wall Street trading lightly in the red (Barcelona) - US stocks are trading in negative territory on Friday, following a day of impressive gains on robust macroeconomic fundamentals. The mood has shifted today however as China announces further tightening measures while uncertainty regarding euro-zone sovereign debt lingers in the marketplace.

After an hour of trading, major indices in New York track their global counterparts to the downside. The DOW is showing a modest loss of 12 points or 0.11% so far, while the NASDAQ and S&P drop by 0.12% and 0.20% respectively.

On a day of light volume due to little economic information, China´s move to raise banks´reserve requirements came on the heels of Fed chief Ben Bernanke defending the recent QE2 measures at a conference in Frankfurt, while criticizing the Asian giant for running a huge surplus. In particular, Bernanke argued that yuan appreciation is happening at too slow of a pace resulting in global imbalances and slow growth for its trading partners.

Crude oil edges higher on Ireland bailout (Barcelona) - Reacting to the news that the Irish government formally applied for aid over the weekend, markets are beginning the week with improved risk appetite driving crude prices to the upside. The front-month crude contract currently trades at $82.67 a barrel, where it is nearly $0.50 higher since open.

The main driver of crude prices today is a weaker US dollar against the euro. The announcement of an Irish bailout is helping to ease concern in the common currency, which has weighed heavily in recent weeks. A weaker greenback against principle rivals makes crude, as well as other dollar-denominated commodities, less expensive and thus more competitive on international markets.

With little economic information of importance to be released today, commodity traders will continue to focus on the details of the Irish debt situation and speculate on the possibility of contagion to the other periphery nations.

US GOLD - Comex gold closes level as dip-buying pares earlier losses

New York 19/11/2010 - Gold on the Comex division of the New York Mercantile ended a volatile week on a muted note as bargain hunters placed a floor under prices and many investors sat out the day due to continued uncertainly over the Irish debt crisis.
Gold futures for December delivery closed Friday down 70 cents at $1,352.30 an ounce. The yellow metal was down about 1 percent for the week.
"There's plenty of market fatigue plus there's some lack of knowledge by market participants about exactly what is going to come out of this Ireland bailout. That, along with the amount of volatility we've had, is pushing some people to the sidelines," Sterling Smith, an analyst with Country Hedging, said.
It now appears that Ireland, whose banking system has been badly damaged by the collapse of the housing market, will likely seek a bailout from the European Union after initially dismissing the idea; however, the shape and size of the package is still unclear.
Nevertheless, a more positive tone out of Ireland led the euro to gain modestly to 1.3678 against the dollar, up from 1.3635 Thursday.
But even a resolution to Ireland's problems doesn't spell the end of Europe's sovereign-debt issues.
"Once you open up the bailout barrel, everyone is going to line up to ask for theirs. Credit default swaps on Portugal, Spain and Italy all moved up overnight, which shows that the market is starting to appraise more risk in those countries," Smith said.
Gold reached its intraday low of $1,342.50 in the early morning hours soon after China announced that banks there will have to put up 0.5 percent more in reserve requirements in a bid to combat inflation. Commodities traders worry that a change in the bank reserve ratio will make it more difficult obtain hard assets.
However, gold was able to recover most of those losses later in the session as end of the week bargain hunters emerged in the marketplace.
"There was definitely some buying on dips, which is indicative that the market is going to turn bullish, but I don't think anyone wants to be too aggressive in front of a short week," Smith said.
MKS Finance SA said in a note that gold's near-term trajectory is still quite cloudy.
"While a deeper correction shouldn't be ruled out, with gold falling as low as $1,250 as year-end approaches, ongoing uncertainty created by euro-zone debt issues and another round of quantitative easing in the US are expected to continue to attract buyers to the perceived safe-haven asset," MKS said.
In the other precious metals, Comex silver for December delivery closed up 34.5 cents at $27.179 an ounce.
Platinum for January delivery on the Nymex was up $23 at $1,663.90 an ounce, while December palladium settled up $7.95 at $695.50 an ounce.

LME LATEST - Metals trade sideways, hold gains on steadier euro

- Base metals settled into a sideways ranging pattern on the LME on Monday morning, largely holding modest gains. They were underpinned by the euro's steadiness after the weekend Irish financial bailout package and consolidating in the middle of the session's ranges. Despite the multi-billion-euro loan package that Ireland has requested, sovereign debt will remain an issue in the eurozone, so sentiment in the metals complex has been laced with caution.

- Copper, which stalled above $8,500, was trading lightly at $8,430 per tonne, still a $26 advance from Friday. Inventories continue to decline - they fell for the 12th day in a row, down 825 tonnes to 359,000 tonnes, the lowest once more since October 20, 2009.

- Aluminium was hemmed in below the $2,400 level, with business at $2,293, up $29 still. There was a 4,100-tonne fall in stocks to 4,298,025 tonnes. Nickel business at $22,000 was up just $150 while stocks recorded their fourth successive daily decline from what had been five-month highs, dropping a net 90 tonnes to 130,014 tonnes.

- Cobalt inventories, which have been declining modestly in recent days, reversed that trend and jumped 8.6 percent or 15 tonnes to 189 tonnes, due to warrantings in Rotterdam.

BASE METALS European Opening View - Metals get some lift as dollar weakens

The metals started off by extending their rebounds on Friday, with prices seeing average gains of 1.5 percent at the day’s highs, but then selling emerged and prices ended the day with an average loss of 0.8 percent, although the performance was mixed. By and large the metals are in consolidation mode, whether they are also forming bear flags remains to be seen. That said, with China announcing price caps and increase banks’ reserve requirements and Ireland agreeing to an EU rescue package, risk aversion may ease now.

This morning the metals are up an average 1.1 percent, with lead up 1.8 percent at $2,315, copper is up 0.3 percent at $8,464, while aluminium is up 1.2 percent at $2,303. Volumes have been average, with 2,751 lots of copper and 1,301 lots of zinc traded, see table on right for more details.

In Shanghai the February contracts are off slightly across the board with average losses of 0.2 percent as they followed the LME’s lead from Friday. Copper is at Rmb 63,310, aluminium is down 0.2 percent at Rmb 16,400 while zinc is down 0.5 percent at Rmb 17,800.  Spot copper in Changjiang is 0.5 percent firmer at Rmb 63,000-63,400, while the LME/Shanghai copper arb remains firmly shut.

The dollar is weaker as the Euro has moved higher on the back of Ireland’s rescue package, it is last at 1.3784, the pound is firmer at 1.6060, the aussie is stronger at 0.9950 and the yen is firmer too at 83.40. Gold is stronger at $1,365 – aided by the weaker dollar, while oil is firmer too at $82.75.

Equities – the Dow closed up 0.2 percent on Friday, performance in Asia has been mixed with the Nikkei up 0.9 percent, the Hang Seng is down 0.4 percent, China’s CSI is down 0.2 percent and the MSCI Asia Apex is up 0.4 percent. So a mixed bag, although European equities are likely to start off on a positive footing given the Irish news.

On the economic front there is little data out, EU consumer confidence is out at 3pm GMT and President Trichet is talking at 4pm GMT.

So after the gyrations of last week the metals start this week in the middle of last week’s ranges – they have unwound both the early November overbought conditions and last week’s oversold conditions and are now waiting for fresh direction. On balance we would say prices were difficult to justify at the highs and with China now trying to rein in inflation, the fact that Ireland has had to seek assistance could mean there is more trouble ahead for Europe and with austerity going to be felt more in the months ahead, we feel prices are still over priced.
LME Overnight Performance
  7:20 AM +/- +/- % Lots
Cu 8464 24 0.3% 2751
Al 2303 27 1.2% 521
Ni 22170 270 1.2% 178
Zn 2205 25 1.1% 1301
Pb 2315 42 1.8% 189
Sn 25300 200 0.8% 9
Steel Med 516 0 0.0% 0

Economic Agenda
Time Country   ACTUAL Expected Previous
EU  Consumer Confidence   -10 -11
4:00pm EU  ECB President Trichet Speaks      

LME MORNING - Metals stable, supported by steady euro; complex cautious still

London 22/11/2010 - Base metals settled into a routine sideways trading pattern during Monday morning LME trading, having pulled back to consolidate below early highs but broadly underpinned by the steady euro and the financial rescue plan for Ireland that that was agreed yesterday.

Despite the multi-billion-euro loan package that Ireland has requested, sovereign debt will remain an issue in the eurozone, so sentiment in the metals complex has been laced with caution.

"Funds generally derisk ahead of Thanksgiving and the Christmas break, hence the profit-taking seen last week," John Meyer of broker Fairfax said.

The euro was trading around 1.3735 against the dollar. As well as a steadier euro, share markets were also higher, helping to defuse one element of uncertainty that has overhung the base metals complex so far this month, causing some hefty price falls.

"Over the past weeks, the price trend in industrial metals had been fairly bumpy with several temporary corrections and recoveries," broker Credit Suisse said. “Nevertheless, the sector is still within a fairly strong uptrend.”

"With the market focus now turning away from sovereign debt problems in Ireland, we think that economic fundamentals are likely to come back to the forefront," it added.

The terms of Ireland's financial rescue plan are to be negotiated over the coming days. On Sunday, the Irish Government agreed to make a formal request for a multi-billion-euro loan package to the European Union and the International Monetary Fund.

These loans are to tackle the country's banking and budget crisis in a bid to protect Europe's financial stability.

Nevertheless, the wider backdrop will continue to sway price movement and sentiment for the metals, with China and further monetary developments still in focus. China on Friday raised cash reserve requirement for banks, the second such move in a fortnight, stepping up its battle to tame inflation.

Advances in the metals complex were measured, however, with the market still rebuilding momentum after the steep sell-off and across-the-board technical corrections.

"We would say prices were difficult to justify at the highs and, with China now trying to rein in inflation, the fact that Ireland has had to seek assistance could mean there is more trouble ahead for Europe," William Adams of FastMarkets said.

Action this week is likely to be compressed - US markets are closed on Thursday for the Thanksgiving Holiday. Today, apart from EU consumer confidence figures later, there are no significant data releases so price movements are likely to reflect currency swings and technical signals.

"The economic focus will remain on the third-quarter preliminary US GDP data due for release tomorrow," Fairfax's Meyer said.


Copper stalled above $8,500 earlier and ranged back to trade recently at $8,410 per tonne, up just $6 from Friday. Inventories continue to decline - they fell for the 12th day in a row, down a net 825 tonnes to 359,000 tonnes, the lowest once more since October 20, 2009.

Feb copper minis saw recent business at $8,424, with 10 lots changing hands - brokers from today are quoting the five-tonne cash-settled contracts more actively.

On the physical side, reports circulated that Chile's Codelco had raised annual physical copper premiums for Chinese buyers by 35 percent to $115 per tonne for 2011. So far it has raised premiums to Japanese, South Korean and European buyers to $98 per tonne.

Aluminium was hemmed in below the $2,400 level, with business at $2,291, up $27 still. There was a 4,100-tonne fall in stocks to 4,298,025 tonnes.

Nickel business at $21,900 was up just $50 while stocks recorded their fourth successive daily decline from what had been five-month highs, dropping a net 90 tonnes to 130,014 tonnes.

Elsewhere, zinc traded at $2,170, up $10, with stocks falling 400 tonnes. But lead fell back to $2,270, down $7, despite a 200-tonne inventory decline. Tin rose $100 to $25,100 although inventories rose again - up 100 tonnes.

Cobalt inventories, which have been declining modestly in recent days, reversed that trend and jumped 8.6 percent or 15 tonnes to 189 tonnes due to warrantings in Rotterdam. There were no movements in headline molybdenum and steel billet stocks.

BULLION MORNING - Gold rangebound but stronger euro, macroeconomic woes support

London 22/11/2010 - Gold was rangy in Monday morning trade, supported by a stronger euro after the Irish financial bailout was confirmed, while persisting macroeconomic uncertainty maintained safe-haven interest.

Spot gold reached its highest in almost a week at $1,365 but is trading within a relatively tight band - it was last at $1,359.80/1,360.60 per ounce, up $6.30 from Friday. On the charts, next resistance is set at the uptrend line of $1,366 and then $1,376, with support pegged at the $1,342 support line and around the recent low of $1,329.

On Sunday the Irish Government agreed to make a formal request for a multi-billion-euro loan package to the European Union and the International Monetary Fund, with terms to be negotiated over the coming days. These loans are to tackle the country's banking and budget crisis in a bid to protect Europe's financial stability.

But fears of the effects of Chinese fiscal tightening last week - it raised the cash reserve requirement for banks for the second time in two weeks on Friday - combined with lasting fears of debt contagion in the eurozone despite the Irish aid package are keeping safe-haven demand well supported.

"Since investment demand continues to be strong and US bond yields remain at a very low level, we would argue that prices have further upside," broker Credit Suisse noted. "However, the uptrend is likely to be less steady in the future as sentiment looks shaky.”

Gold has struck repeated record highs in recent weeks, bolstered by store-of-value-related buying on inflationary fears and a subsiding dollar, to hit a lifetime best of $1,424.60 on November 9.

But a steep correction in recent sessions - it fell as low as $1,329.80 last week - has heightened expectations of volatility in the near term, market participants said.

"While a deeper correction shouldn't be ruled out, with gold falling as low as $1,250 as year-end approaches, uncertainty created by eurozone debt issues and another round of quantitative easing in the US are expected to continue to attract buyers to the perceived safe-haven asset," broker MKS said.

The euro struck its most expensive since November 11 against the dollar at 1.3786 this morning, buoyed by news of the Irish bailout - it has since settled back to 1.3734, still up around half a cent.

And European equities were solid in early trading, trading between 0.3 percent and 0.5 percent higher.

Only eurozone consumer confidence figures are due in a light day for data, although ECB president Jean-Claude Trichet is due to speak this afternoon.

Among other precious metals, silver was at its most expensive since November 10 at $27.92 per ounce earlier this morning before paring gains but, at $27.54/27.59 per ounce, was still up 20 cents.

Platinum rose to its costliest in almost a week at $1,676 per ounce before settling at $1,666/1,671, flat from the previous session.

Palladium gained $6 to $709/714 per ounce - it had hit its highest since November 10 at $714 earlier.

LME LATEST - Metals slide back in rings as sentiment softens, euro loses ground

- Base metals were largely on the defensive during the open-outcry sessions on Monday, as the early upbeat mood gave way to increased caution, and with the euro losing some its initial steadiness prices in the complex drifted lower.

- The euro, which had been around its highest for a week or so at 1.3786 against the dollar, fell away to 1.3665 recently as the knee-jerk uptick to Ireland's proposed financial bail-out petered out and worries over sovereign debt contagion remained. Share markets, which were steadier earlier, also eased, with European equities around 0.3 percent lower at midday.

 - Copper, above $8,500 in Asia, retreated near to $8,360 before settling at $8,369 per tonne, a $35 loss from Friday. Aluminium, in contrast, held at $2,290, still up $26.

 - But zinc dropped to $2,151, a $9 loss, while lead eased back to $2,250, a $27 decline. Nickel business at $21,759 was down from a previous $21,850.

European stocks coming off morning highs due to Irish rescue package (Barcelona) - Equities over the European continent benefited early from the weekend news that Ireland had finally formally applied for EU/IMF funds in order to stave off default. The initial wave of optimism has somewhat worn off however by mid-day, with the FTSE 100 hanging around even while the DAX and CAC 40 post gains of 0.31% and 0.05% respectively.

The late Sunday announcement that Ireland had succumbed to EU pressure to accept bailout funds gave investors reason to celebrate on Monday morning, however with details still to be clarified there remains some slight uncertainty lingering in the marketplace. The question now is whether other periphery nations like Portugal and Spain will be next in line, or stability in the community can be re-established.

In the London market, resource firms are some of the best performers so far with Vedanta Resources up nearly 2.0% while Xstrata gains by 0.50%. The financial sector on the other hand remains in the negative due to exposure to Irish debt, with the Royal Bank of Scotland down nearly 3.0%, while Lloyds Banking Group drops nearly 2.0%.

BOJ’s Morimoto: Expansion of asset buying one strong option if economy worsens – Kyodo

Always on guard against rapid forex moves Japan long-term yields rising somewhat, want to watch closely FOMC's QE aimed at supporting US economy Won't comment on other central bank's monetary policies BOJ's assrt buying is different from Fed as it includes risky assets May take one year or more for asset purchases to have impact

RBA: Deputy-Governor Battelino with another bullish outlook

Recent modest tightening made to guard against inflation risks Chinese and Indian demand for resources could stay strong for 20 years; iron ore and coal prices have been rising again recently Excessive slowdown in China unlikely Business investment is high and unemployment should stay low Inflation could become a significant policy issue in Asia if growth

Fed to trim growth forecast (Barcelona) - Ahead of tomorrow's release of the latest FOMC meeting minutes, the Financial Times reports that they will reveal grimmer forecast of the economy through 2013. The revisions to the outlook are to affect growth, unemployment and inflation, and the minutes will show committee's members concerns as to the implementation of the $600 billion asset purchase decided by the Fed.

In their last forecast, published in June, members within the open market committee expected growth in 2011 to range between 3.5% and 4.2%. As events unfolded since the summer, those expectations are to suffer a revision a be trimmed to 3 - 3.5 per cent.

In terms of unemployment, currently at 9.6%, the forecast of between 7.1% - 7.5% by the end of 2012 is likely to be left behind in favor of a bleak 8%, or even above that.

As for inflation, the Fed's target of 2% or a little below is to remain subdued, Chicago Fed Evans said that a 1% inflation in 2012 would not be out of the picture and that less than 1.5% in 2013 is also a possibility.

These reactions along with how much support QE2 has within the committee will give investors clues as to whether the plan will go on as planned or be cut short if risks pile and benefits fail to materialize. There is a third option, if at this juncture when the economy has no traction, the Fed's response was QE2, will they extend it if the forecasts become a reality?

ECB’s Gonzalez-Paramo: Ours are little 


ECB bond buys are small volume compared to other countries Spain needs to improve communications on the reforms it plans Excess liquidity in money markets reduced by 90% since summer That last bit has been a boost to the euro as money market rates have "normalized" in recent months.

Sunday 7 November 2010

Forex: EUR/USD recovery constrained below 1.4120 (Barcelona) - Euro rally topped yesterday at 1.4280, and the pair has given away more than 200 pips on Friday to hit session low at 1.4030 after upbeat US employment data, and recovery attempts remain capped below 1.4120 intraday resistance so far.

On the upside, immediate resistance lies at the mentioned 1.4120, and above here, 1.4180 (previous lows), and above here and 1.4245 (session high). On the downside, support levels lie at 1.4030 (session low), and bellow here, 1.3990/00 (Nov 3 lows) and 1.39510 (Oct 29 high).

Technical indicators show the pair exhausted to the downside, according to Valeria Bednarik, technical analyst at, suggesting further recovery: "Technically, hourly indicators look exhausted to the downside, suggesting some further recovery yet to be confirmed once the pair overcomes 1.4120 immediate resistance zone."

Gold bullion threatening $1400 milestone (Barcelona) - Gold futures are setting new historic records for a second-consecutive day, as investors rush to the safety of the metal in the wake of the Fed´s QE2 announcement. In early trading over NY, the most active gold contract for December delivery trades at $1396.80 a troy ounce as it leans toward the $1400 milestone.

The safe-haven appeal of gold has been markedly amplified since Wednesday´s Fed announcement, due to the fact of a weakening US dollar. Today, the yellow metal dipped over Asia and Europe on profit-taking as well as a better-than-expected US NFP report which gave the greenback some breath. Nonetheless, the upside momentum is overshadowing the upbeat employment report as demand remains high.

Forex: USD/CHF, capped at 0.9640, back to previous range (Barcelona) - Dollar rally witnessed after Non Farm payrolls has been short lived, as the pair, capped at 0.9640 session high has pulled back returning to previous trading range, between 0.9550 and 0.9600.

The pair is trading at the moment at 0.9570, with next support levels at 0.9550/55 (session lows), and below here, 0.9510 (Daily pivot point S1) and 0.9460 (Oct 14 low). On the upside resistance levels lie at 0.9640 (session high), and above here, 0.9690/00 (Nov 2/3 lows) and then 0.9735 (Nov 4 high).

The pair seems likely to resume its bearish trend, according to Valeria Bednark, technical analyst at "With hourly indicators however still bullish; below 20 SMA now around 0.9590, pair will likely resume its bearish trend, while daily close below 0.9600 should signal fresh historical lows for the upcoming week."

Forex: Majors wait for US housing data (Buenos Aires) – Following better than expected US employment data and mixed spikes across the board, majors had settle down in tight ranges, waiting for the last fundamental number of the week, the US Pending Home Sales. Expected around 3.2% compared to previous month 4.3%, dollar remains under pressure with gold nearing $ 1400/oz, setting a fresh record high around $ 1398. Market anyway, is mixed today, as commodity currencies found strength to soar against greenback, while yen and euro had come under pressure since early Europe.

EUR/USD quotes around 1.4080, unable to overcome 1.4120 static resistance area, that has been capping the upside since post data dip to 1.4030 daily low. USD/JPY has regained the 81.00 level, trading over the past few hours in between 81.00 and 81.30, far from yesterday’s high of 81.65 and immediate resistance level. Finally, USD/CHF holds barely below 0.9600, favored to the downside on SNB comments about needed rate hike in the short term, while GBP/USD remains range bound lacking strength either side of the board, although supported above 1.6200.



Forex: USD/JPY surges near daily high

Fri, Nov 5 2010, 16:06 GMT (Buenos Aires) – Dollar has accelerated higher across the board on London fix, favored by gold that’s falling below $ 1390/oz after setting a fresh record high at $ 1398/oz. Some profit taking at the end of the week plus position adjustment ahead of US data, are the main reason of current movements, after an eventful couple of hours that saw majors trading in tight ranges.

USD/JPY surged above 81.30, approaching to daily high at 81.46 set after better than expected US employment readings earlier today. Still limited to the upside by yesterday’s high around 81.65, pair has managed to slowly gain over this week, as the 80.30 15-year low posted past Monday, seems to have draw a bottom line, at least temporal. Still, market rumors suggest Japanese exports are ready to sell around the 82.00 level, while suspected stop losses lie above this one.

US stocks flat as 2-day rally begins to subside (Barcelona) - A widely upbeat US NFP report helped to bring Wall Street back into positive territory, however equities still struggle near even as wave of optimism originating from the Fed´s QE2 announcement begins to fade. So far the DOW and NASDAQ trade slightly under by 0.02% and 0.05%, while the S&P holds onto modest gains of 0.27%.

A day after the DOW closed at its highest level since September 2008, investors are striking a cautious tone as markets appear to be overextended. Still, the recently released US jobs report showed the economy added jobs over October for the first time in 5 months, helping to slightly lift confidence even though the unemployment rate remains at 9.6%.

Among stocks in focus, Kraft Foods is showing a loss of nearly 3.0% after announcing disappointing 3rd quarter results on higher costs. On the flipside, Starbucks and Coventry Health Care are up around 4.0% and 5.0% respectively as both firms post strong quarterly financials.

LME LATEST - Metals pare gains in PM sessions, but sentiment boost seen from US jobs data

Fri, Nov 5 2010, 16:37 GMT

- Base metals turned back from session highs during the PM sessions, with prices mixed but generally ending the week on a robust note. The bullish sentiment that has developed this week was underscored by today's US October non-farm payrolls report. This - the last of this week's key macro-events - came in much better than expected, with US employers adding 151,000 jobs last month compared with a forecast increase of some 60,000.

 - To some extent the complex was restrained by the firm dollar, which was ushered higher by the employment figures and was a firmer 1.4040 against the euro this afternoon. Some profit-taking in the metals after three days of hefty advances was also evident.

 - Copper was the exception, trading at $8,685 per tonne, still up $85 from Thursday, with volume around 14,500 lots. Earlier in Asia the market hit $8,769.50, its highest since July 2008, against a background of a large position being closed out. Prices are nevertheless getting ever nearer to the all-time high of $8,940 set that same month. Falling inventories - stocks are just 275 tonnes above their lowest for 12 months - and the start of a strike at the Collahuasi mine in Chile today mean that the impetus is upwards.

 - Aluminium business at $2,446 was $14 lower, with the market faltering after initially touching levels near the six-month high of $2,492 set yesterday. Resistance is anticipated around there - prices will be at levels last seen in September 2008.

(Editing by Mark Shaw)

US Pending Home Sales (MoM) declines 1.8% in September 

Fri, Nov 5 2010, 16:30 GMT (Barcelona) For more information, read our latest forex news.


Forex: EUR/USD could rise to 1.45 in the coming months – Danske Bank

Fri, Nov 5 2010, 18:28 GMT (Córdoba) – The Euro could extend its rally against the Dollar in the coming months according to analysts at the Danske Bank. The second round of quantitative easing by the FED and the exit strategy of the European Central combined will pushed the EUR/USD higher the bank affirm.

“The ECB remains committed to its exit strategy. Short money market rates in the eurozone remain elevated but can actually rise more if liquidity is being drained further. Hence, we maintain our call for a gradual dollar depreciation over the coming months and maintain our forecast of EUR/USD to reach 1.45 in three months and continue towards 1.50 on the 12- month horizon unless the monetary policy divergence between the Fed and the ECB abates”, analyst at the Danske Bank said.

Forex: AUD/USD weekly gains above 300 pips (Córdoba) – AUD/USD posted the biggest weekly gain since July and finished above parity for the first time since it’s freely traded. The pair rose more than 300 pips during the week supported by a rate hike in Australia, soaring gold prices and FED’s announcement of more quantitative easing.

“On a longer-term perspective, AUD/USD potentially carries enough of a bullish bias to target upside around the 1.0500 price region, which is a key 261.8% Fibonacci extension level. To the downside, parity now serves as significant support where it previously served as strong resistance before breakout”, said James Chen, chief technical analyst at FX Solutions.

AUD/JPY extended its rally on Friday and reached at 82.60, the highest price in 5 months. The pair accumulates an increase of 330 since Monday’s Asian session.

The Aussie and the New Zealand Dollar were the biggest gainers during the week among the most traded currencies. 

US GOLD - Comex gold pushes aside dollar rally to strike new record just below $1,400

Fri, Nov 5 2010, 20:11 GMT

New York 05/11/2010 - Gold on the Comex division of the New York Mercantile Exchange touched a fresh all-time high Friday and closed just shy of $1,400 an ounce as overall bullish sentiment outweighed a unexpectedly strong US jobs report, which led the dollar to rebound.
Gold futures for December delivery settled up $14.60 to $1,397.70 an ounce. Earlier in the session, the yellow metal hit a lifetime high of $1,398 for the most actively traded contract.
Comex silver also posted strong gains as the December contract touched a new 30-year high of $26.915 an ounce before closing up 71 cents at $26.748.
Precious metal prices are still being swayed by positive post-qunatitive easing (QE2) euphoria. On Wednesday, the Federal Reserve announced its intentions to buy an additional $600 billion in Treasury bonds in an attempt to pump some added life in the economy.
"Today was a continuation of what's been going on. It's all investment demand as people are trying to move out of paper assets because they're afraid that the central banks are going to crank up the printing presses," a US-based gold trader said.
The market even shrugged off a positive jobs report, which typically would have dented bullion prices.
The US Labor Department reported that the economy added 151,000 jobs in October, an improvement over September, when 41,000 jobs were lost, and much better than expectations of a 63,000 gain.
Based on that news, the dollar climbed about 1 percent against the euro to 1.4039 from 1.4215 on Thursday.
"New buying in gold and silver and their record highs led open interest figures to near records. Buyers were anxious enough to ignore the improving dollar and were intent on not missing the market," George Gero, senior vice president and financial consultant with RBC Wealth Management, said.
Gero added that QE2 appears to be working as the weak dollar is allowing foreign buyers to bargain hunt in the metals and agricultural markets.
MKS Finance SA said that the good numbers regarding the US labour market weren't enough to substantially alter the rally in gold, which started since the release of QE2.
"We're just a few steps away from the important $1,400 level which we expect to see very soon in the actual environment of concern over inflation and with the dollar under pressure boosting gold's appeal as a currency hedge," MKS said.
The first trader said that the gold will likely see some physiological resistance around $1,400, which is also a popular option strike price where people could be defending positions.
"It's always dangerous when you go into new high ground as this is a market tends to have some pretty large corrections; however, the last correction we had from $1,388 to $1,315 didn't really change the dynamics of the market or make it bearish," he said.
He added that if the sentiment does changes all at once there would be a big washout, but until that happens money will continue to pour in to metals.
"There are still folks out there who feel they missed the boat and are looking to get in. That's why we're seeing those dips get pretty good support," the trader said.

US Consumer Credit increases $2.15B in September (Barcelona) For more information, read our latest forex news.

Consumer Credit



Thursday 29 July 2010

BOJ Deputy Governor Yamaguchi across the wires (Reuters)…seeking ways to boost potential growth

both upside/downside risks higher than in April Japanese economy gradually improving want to think what more BOJ can do to boost potential growth global market instability is rising again need to work closely with other CBs to ensure market stability export strength gradually spreading to private demand balance sheet adjustment still exerting downward pressure on US & EU economies need to watch if the output gap is sustainable signs of overheating in emerging economies increasing steps to support Japan's growth areas not limited to BOJ's latest lending scheme

BoE considers every option before keeping rates (Barcelona) - The Bank of England stayed on track and kept interest rates unchanged. The minutes show that inflation is considered to subside eventually: "it seemed likely that growth would be weaker than previously expected but, at least for a while, inflation was likely to be higher. But the Committee’s central view remained that the substantial margin of spare capacity was likely to persist for some time and would bear down on inflation over the medium term."

Talks about bringing rates down did take place as stated in the minutes: "The softening in the medium-term outlook for GDP growth over recent months would put further downwards pressure on inflation, once the impact of temporary factors had waned. Pay growth had remained subdued and there was little sign of a material pickup in medium-term inflation expectations. A further modest monetary stimulus would act to offset the softening in demand prospects and make it more likely that the inflation target would be met in the medium term."

Even in the current state of the economy, the committee discussed a raise in rates as well: "Inflation was likely to remain above target for some months and there was a risk that medium-term inflation expectations would rise. The resilience of inflation over recent months had suggested that the downward impact of spare capacity could be weaker than expected and this created uncertainty around the extent to which inflation would fall back in the future."

ForexLive Asian market wrap: chance of RBA rate hike recedes

Australian CPI trimmed mean +0.5% Vs +0.8% forecast Chances of RBA rate hike next week now virtually zero RBNZ expected to raise New Zealand rates tomorrow by 25bps South Korean June current account surplus $4.2 billion South Korean central bank seen buying USD/KRW Annual IMF report on China released: drops reference to Yuan being substantially undervalued UK economy: NIESR raises 2010 forecast but lowers forecast for 2011 Regional stockmarkets up by between 0.25% and 1.9% It has been a moderately busy session here in Asia today, with most of the interest centering on the release of Australia's latest CPI figures. RBA boss Glenn Stevens said last week that the RBA would be watching the number closely, so if he is there wil be no rate hike next week as the trimmed mean showed a significant decline. This coming on the back of Monday's PPI will seal the deal for further pauses. AUD/USD fell from .9020 to .8950 immediately after the number and has been unable to bounce since as traders exit their long AUD positions against all other major currencies. Ranges: AUD/USD .8925/.9025; AUD/NZD 1.2203/1.2334. EUR/USD drifted lower in early trade as early Tokyo booked profits in EUR/JPY after the big move higher in that cross overnight. EUR/USD fell to its session low after the Australian data but has since recovered as the short covering on all EUR cross pairings has continued. Ranges: EUR/USD 1.2968/1.3007; EUR/CHF 1.3767/90. USD/JPY was unwilling or unable to test corporate offers at 88.00 and has slowly drifted lower albeit in fairly tight ranges. AUD/JPY selling has been outweighed by EUR/JPY buying on the crosses. Ranges: USD/JPY 87.66/93; EUR/JPY 113.75/114.30 Cable has been quietest of the major pairings in a 1.5564/96 range and EUR/GBP .8330/43. Markets: Nikkei +1.9%, HK +0.6%, Shanghai +0.9%, Kospi +0.2%. Gold $1162/oz.

Fed’s Lacker: US economic recovery is sustainable

Tighter policy would be appropriate when economic growth strong enough, tough to know when to start normalising Recent US economic data suggests durable turnaround in progress Failure to address US fiscal issues will dim the appeal of Treasuries (across the Reuters newswires)

The European Central Bank maintains 1% interest rate

Thu, Jul 8 2010, 11:58 GMT

Related News (Barcelona) - The Governing Council of the ECB issued today its decision regarding itnerest rates, it met everyone's expectations by an unchanged 1%. Market consensus anticipated the decision correctly.

The other interest rates decided were: marginal lending on 1.75% and deposit facility at 0.25%, Both unchanged from previous meetings

Monday 26 July 2010

European Session News Summary

Euro Zone industrial new orders

Euro-Zone seasonally adjusted industrial new orders was released today, showing a rise in the month of May by 3.8%, compared with the previous 0.9% and the expected -0.1%, while on the yearly scale the index rose by 22.7%, compared with the previous 22.1 and the expected 20.0 percent.

UK's June Retail Sales better than expected

UK released its Advanced June Retail Sales excluding Auto fuel index showing a rise on the monthly scale by 1.0 percent, compared with the previous revised 0.7% and the expected 0.6%, while on the yearly scale the index rose by 3.1 percent, compared with the previous revised 2.9% and the expected 2.4%.

Moreover, Retail Sales including auto fuel rose in the month of June by 0.7%, compared with the previous revised 0.8% and the expected 0.5% while on the yearly scale the index rose by 1.3%, compared with the previous revised 1.7% and the expected 1.0 percent.

Euro zone PMI manufacturing and services beat estimates

Euro zone PMI manufacturing rose to 56.5 from 55.6, while estimates referred to 55.1. Services surged to 56.0 from 55.5, exceeding projections of 55.0. Accordingly, the composite index edged up to 56.7 compared with the preceding 56.0 and median forecasts of 55.5.

French manufacturing expansion ease, while services resume growth

French PMI manufacturing eased its expansion in July to 53.7 from 54.8, while services sustained growth to 61.3 from 60.8, as reported by the preliminary reading. Analysts expected manufacturing and services to reach to 54.1 and 60.0 respectively.

German manufacturing and services resume expansion

German PMI manufacturing resumed expansion in July to 61.2 compared with the prior 58.4 and median estimates of 58.0. Services also expanded to 57.3 from 54.8, beating estimates of 54.5

Euro Zone sovereign debt is slowing growth

European Market Update: Better European data prompts short covering rallies in equities and currencies

Economic Data

- (FR) France Jul Business Confidence: 98 v 94e; Consumer Confidence: -39 v -40e; Own-Company Production Outlook: -9 v -7e; Production Outlook Indicator: -2 v -6e

- (FR) France Jul Preliminary PMI Manufacturing: 53.7 v 54.1e; PMI Services: 61.3 v 60.0e

- (NV) Netherlands Jun Unemployment Rate: 5.5% v 5.6% prior

- (DE) Denmark Jul Consumer Confidence: +4.1 v -1.5 prior

- (GE) Germany Jul Advance PMI Manufacturing: 61.2 v 58.0e; PMI Services: 57.3 v 54.5e

- (TT) Taiwan Jun Unemployment Rate: 5.2% v 5.2%e

- (EU) Euro Zone July Advanced PMI Manufacturing: 56.5 v 55.1e; PMI Services: 56.0 v 55.0e; PMI Composite: 56.7 v 55.5e

- (UK) Jun Retail Sales Ex Auto Fuel M/M: 1.0% v 0.6%e; Y/Y: 3.1% v 2.4%e

- (UK) Jun Retail Sales with Auto Fuel M/M: 0.7% v 0.5%e; Y/Y: 1.3% v 1.0%e

- (HK) Hong Kong Jun CPI - Composite Y/Y: 2.8% v 2.7%e

- (EU) Euro Zone May Industrial New Orders M/M: +3.8% v -0.1%e; Y/Y: 22.7% v 20.0%e

- (RU) Russia Gold & Forex Reserves w/e Jul 16th: $469.3B v $467.3B prior

Fixed income:

- (HU) Hungary sells HUF in 12-month Bills; avg yield 5.75% v 5.43% prior; Bid-to-cover: x v 2.0x prior



- Major European PMI readings generally better than forecasts; UK retail sales beats estimates; Better European economic data for July as concern over the sovereign-debt crisis eased coupled with an increase in global trade spurred its exports.

- Fed's Bernanke Senate testimony dampens all optimism on US economy.

- Brazil Central Bank raise SELIC Target by 50bps; less than the 75bps hike expected

- Chatter circulating that EU stress test results being released earlier than the planned 16:00 GMT On Friday, July 23rd

- EU Trade Chief: Greece and Spain bonds good investment for China.

- IMF: Euro Zone sovereign debt is slowing growth.


- As of 5:45am ET Euro Stoxx 50 Index +1.7% at 2,684 ; DAX Index +1.4% at 6,075; CAC-40 Index +1.6% at 3,550 and FTSE 100 Index +0.9% at 5,260


- ABB [ABBN.SZ] Reports Q2 Net $623M v $545Me, EBIT $975M v $850Me Rev $7.6B v $7.5Be

- Faurecia [EO.FR] reported H1 Net €101.9M v loss €364.6M y/y, Rev €6.8B v €4.4B y/y

- Syngenta [SYNN.SZ] reported H1 Net profit $1.3B (ex charges) v $1.4B y/y, Rev $6.7B v $6.7B y/y

- Technip [TEC.FR] reported Q2 Net €106M v €102Me, Rev €1.49B v €1.5Be; on track to deliver 2010 objectives

- Volvo [VOLVB.SW] reported Q2 Net SEK3.15B v SEK2.17Be, Rev SEK68.8B v SEK65Be

- SSAB AB [SSABA.SW] reported Op profit SEK708M v SEK697Me, Rev SEK10.9B v SEK11.1Be

- Outokumpu [OUT1V.FH] reported Q2 Net Profit €44M v €43Me; Sales €1.11B v €1.1Be


- Credit Suisse [CSGN.SZ] reported Q2 Net CHF1.6B v CHF1.4Be, Rev CHF8.4B v CHF7.7Be

- Swedbank [SWEDA.SW] reported Q2 Net SEK1.6B v SEK651Me, Net interest income SEK3.8B v SEK4.1Be

- Banco Sabadell [SAB.SP] reported Q2 Net €125.2M v €108Me, H1 Net Interest Income €765M v €747.4Me


- Lonza Group [LONN.SZ] reported H1 Net CHF 135M v CHF113Me, Rev CHF1.3B v CHF 1.4Be

- Ferrexpo [FXPO.UK] cancelled $500M bond sale, citing cost of refinancing as too high


- Biomerieux [BIM.FR] reported H1 Rev €651M v €638Me. Guided FY10 Rev up 6% y/y (had previously guided +7%)

- Roche [ROG.SZ] reported H1 Net CHF5.7 v CHF5.6Be, Rev CHF24.6B v CHF25Be; confirms outlook

- Nicox [COX.FR] received letter from FDA stating that painkiller Naproxcinod was NOT approved


- Mobistar [MOBB.BE] reported H1 Net €132.4M, EBITDA €281.6M v €282Me, Rev €818.8M v €815Me; Raises FY10 outlook

Consumer discretionary

- Remy Cointreau [RCO.FR] reported Rev €171M v €138M y/y

- Praktiker [PRA.GE] reported Q2 Net €15.1M v €29Me y/y, Rev €1.04B v €1.0Be; Cuts guidance for FY10 in the low single digit range, below 2009 (implies below €3.7B) (prior in line with 2009 levels)

- Kingfisher [KGF.UK] provided Q2 preclose update: Like-for-like sales -0.8%; Total sales +0.3%; Consumer spending remains under pressure, notably in the UK

- Pearson [PSON.UK] acquired Sistema Educacional Brasileiro's learning system for $497M in cash; to be accretive to EPS in 2011

- Stora Enso reported Q2 Net €159.1M v €159Me, Rev €2.7B v €2.4Be


- Scottish & Southern Energy [SSE.UK] provided interim management statement: Several months marked by low production of renewable energy; Still on course to grow dividend as forecasted


-Autonomy [AU.UK] reported Q2 Net $54.2M v $50.9M y/y, Rev $221M v $195M y/y


- Hungary PM spokesperson: Country to negotiate with EU regarding next year's budget

- Japan ruling party: Reiterates prior view that govt should maintain new JGB sales at ¥44.3T during the next fiscal year

- EU's Rehn says trusts stress tests will give clear picture of state of European banking system

- China Central Bank Vice Gov Hu Xiaolian: Will adjust currency rate with reference to trade balance. He reiterated the view that China's managed float exchange rate system to focus on currency basket and not one currency

- EU Regulator CEBS: Not aware of any change to stress test release schedule

- World Trade Organization (WTO) director Lamy: China is adhering to the organization's rules

- China President Hu: Reiterates to maintain 'moderately loose' monetary and 'proactive' fiscal policy in H2

- Currencies: The USD tried to maintain its recent ranges against the European pairs as Fed Chairman Bernanke's comments late Wednesday to the Senate panel seemed already reflected in recent run of soft US economic data in recent weeks. The dollar's tones turned a bit sour as the major European PMI data exceeded expectations. The UK retail sales data was also above forecasts. The EUR/USD moved off its pre European lows of 1.2740 to test 1.2850 aided by Eastern European names seen buying the pair. The better series of data prompted a short covering squeeze in European equities and the 'rise' in risk appetite took its toll on the greenback in the session.


- In British politics, a recent poll conducted by YouGov placed the Liberal Democrats to its lowest approval rating under Deputy Prime Minister Clegg at 13% against the time of the campaign election at 31%.

- Germany's proposed atomic energy tax may run into problems with European law; the levy would bring in an estimated €3.2B as part of the country's budget consolidation

In the Papers:

- Bank of England member Dale, in an interview with the Independent, stated that British growth and inflation outlook deteriorated in the past couple of months, and that growth is softening, though still sees inflation above target at year end.

- Telegraph's Evans-Pritchard commented on safe haven demand for the Swiss Franc and the losses disclosed by the Swiss National Bank, and referencing analysts at HSBC, if there is a US slowdown, then everyone will buy Swiss Francs. He further states that now that Japan's debt is about 200% of GDP, the CHF has displaced the yen as the ultimate safe haven.

- Also in the Telegraph, following the recent Bank of England minutes some economists believe the central bank could restart its quantitative easing measures. Note this is the first discussion of a possible extension to its quantitative easing since February.

- WSJ running the headline "Euro rally is preclude to a decline". The article noted that the recent rally may be little more than a "summer fling"

Looking Ahead

- 6:00 (CZ) Czech Republic to sell CZK7.0B in 91-day Bills

- 7:00 (BR) Brazil Jul FGV Consumer Confidence: no est v 118.5 prior

- 8:00 (BR) Brazil Jun Unemployment Rate: 7.3%e v 7.5% prior

-8:30 (CA) Canada May Retail Sales M/M: 0.4%e v -2.0% prior; Retail Sales Less Autos M/M: 0.5%e v -1.2% prior

- 8:30 (US) Initial Jobless Claims: 445Ke v 429K prior; Continuing Claims: 4.590Me v 4.681M prior

- 9:00 (US) May RPX Composite 28-day Y/Y: No est v 2.36% prior

- 9:00 (SA) South Africa Central Bank (SARB) Interest Rate decision: Consensus expectations (70%) to maintain interest rates at the current 6.50% level (range of estimates from unchanged to cut 50bps (30%)

- 9:00 (HU) Hungary PM address to Parliament

- 9:30 (US) Fed Bernanke Monetary Report to House panel

- 9:30 (US) Fed's Dudley

- 10:30 (CA) Bank of Canada monetary report

- 10:00 (EU) Euro-Zone Jul Advanced Consumer Confidence: -17e v -17 prior

- 10:00 (US) Jun Existing Home Sales: 5.10Me v 5.66M prior

- 10:00 (US) May House Price Index M/M: -0.3%e v 0.8% prior-

- 10:00 (US) Jun Leading Indicators: -0.3%e v 0.4% prior

- (CO) Colombia Central Bank Interest rate Decision: Unanimous analyst expectations is for the Overnight Lending Rate to remain steady at 3.00%

U.S Market Update

Economic Data

- (CZ) Czech Republic sells CZK7.0B in 91-day Bills; avg yield %; bid-to-cover
- (BR) Brazil Jul FGV Consumer Confidence: 120.0 v 118.5 prior
- (BR) Brazil Jun Unemployment Rate: 7.0% v 7.3%e
- (CA) Canada May Retail Sales M/M: -0.2% v 0.4%e; Retail Sales Less Autos M/M: -0.1% v 0.5%e
- (US) Initial Jobless Claims: 464K v 445Ke; Continuing Claims: 4.487M v 4.590Me
- (SA) South Africa Central Bank (SARB) maintained interest rates at 6.50%; as expected
- (EU) Euro-Zone Jul Advanced Consumer Confidence: -14 v -17e
- (US) Jun Existing Home Sales: 5.37M v 5.10Me
- (US) May House Price Index M/M: 0.5% v -0.3%e

- (US) Jun Leading Indicators: -0.2% v -0.3%e
- EIA Natural Gas Inventories: +51bcf vs. +50 to +55 bcf estimated range

- Very strong corporate earnings reports - including excellent results from several major DJIA components - and some stronger than expected data from both sides of the Atlantic are propelling US equity indices higher. Before the open equities had regained levels seen before last Friday's post-Citibank/BoA slide, and the indices are up even further in mid morning trading. Two modestly positive housing data reports are adding to the positive tone: both the June existing home sales number and the May house price index came in above expectations (although the June home sales data fell below May levels). The NAR warned that June sales are still showing the impact of the tax credit impact. Note also that Chinese President Hu offered supportive rhetoric overnight, saying that China would improve consumption stimulus measures in the back half of the year fueling investors risk appetite. Crude is creeping higher with the front-month contract trading just shy of $79. Copper is hitting two-month highs, while gold is also up, with the August contract within striking distance of $1,200. Fed Chairman Bernanke is testifying before the House this morning, although so far his comments have largely echoed remarks made yesterday before the Senate. Treasury markets have seen some profit taking through both an unwinding of flight to safety trades and profit taking ahead of next week's $104B in scheduled coupon supply. Yields have not backed up all that aggressively though, with the benchmark 10-year still below 2.95%.

- Quarterly results from Dow components UPS, Caterpillar, 3M and AT&T were strong, with outperformance seen on both top- and bottom lines and full-year guidance adjusted higher. UPS's average daily volume was a bit soft, and the CEO warned that the company is not counting on a significant uptick in the economy in the second half of the year. Executives from 3M echoed this comment, and also warned that the period of "easy y/y" comparisons is now over and that it will be more difficult to show improvement in key metrics moving forward. Cat really crushed earnings estimates and boosted its 2010 outlook considerably. Cat also announced plans for two major new facilities in the US and China. AT&T reported one of its lowest postpaid churn numbers ever, although it wireless adds were a bit soft. All four names are driving strength in the DJIA, with UPS up a whopping 7%, CAT up 2% and MMM and T up 3%.

- Rail name United Pacific is up 6% in early trading after beating consensus earnings estimates by a wide margin. Steelmakers Nucor and Reliance Steel are both up more than 3%, although both names were only slightly ahead of the Street on earnings and revenue in their quarterly reports. Note that Reliance missed targets in its guidance for next quarter. Nucor noted that residential and non-residential construction markets continue to show "little, if any, strength."

- Shares of semi major Qualcomm are up 8% in early trading after the firm modestly exceeded earnings and revenue targets. The firm's guidance for next quarter and the full year was also raised somewhat. Note that Qualcomm said the impact of the euro is more than offsetting higher ASPs. Competitor Xilinx also beat expectations modestly, although XLNX is only up 2%. The company said the June quarter marked its third consecutive quarter of record sales. Cypress Semi's shares rose as much as 6% despite the firm's big miss on earnings, although they are well of their best levels. Hard drive maker Western Digital also missed EPS targets, which combined with very weak guidance for next quarter is sending shares of WDC lower, around -5% on the day. Both eBay and Bidu are off their highs. Ebay was in line with expectations and its net payment volumes grew sharply y/y, though its guidance for next quarter was soft.

- Regional banks Fifth Third and SunTrust crushed EPS expectations, with very strong improvements in key metrics. SunTrust was still in the red, but is closer to profitability than any time in the last 18 months. Both banks continue to show big improvements in loan and credit quality. Shares of FITB and STI are up 8% or so. BB&T is lagging after the bank missed earnings expectations by a hair. BB&T's credit quality is not showing the improvements seen among other regionals.

- The greenback tried to consolidate earlier losses against the European pairs during the NY morning but rising risk appetite proved too much of a force to resiste. North American dealers focused on the comments out of China, savoring the global growth potential. The commodity-related currencies are taking the lead, aided by Caterpillar's results. AUD/USD rallied above the 0.89 handle while USD/CAD was able to shake off the poor Canadian retail data. In a monetary policy report, the Bank of Canada lowered its Q2 GDP view to 3.0% from 3.8% prior. EUR/USD tested the 1.29 level during the mid-NY morning where some technical resistance was curbing upside momentum for the time being. Dealers are preparing for a event filled Friday ahead of the EU banking sector stress test results.

Looking Ahead

- 16:00 (US) May RPX Composite 28-day Y/Y: No est v 2.36% prior
- (CO) Colombia Central Bank Interest rate Decision: Unanimous analyst expectations is for the Overnight Lending Rate to remain steady at 3.00%

Bernanke's downbeat assessment disappears

There are two ways to take the words of the Fed Chairman. You can join the crowd of Chicken Littles running through the streets screaming that the sky really is about to fall. Or you can take his promise to act further on policy at face value and buy with both hands on the promise of more stimulus. Today’s response is a reversal of the initial view. Anyone contrarian who went home long of commodity sensitive dollars is certainly ahead of the crowd with the Australian dollar vaulting to a two-month high versus the dollar overnight.

Fx View

U.S. Dollar – The “unusually uncertain” words from Mr. Bernanke were attached to a threat to deliver more monetary stimulus. The response was an elevation in the general level of panic sending equity prices lower and the dollar higher. But U.S. corporations are delivering strong earnings with around 82% of the S&P 500 index constituents surpassing expectations. Thursday’s risk rebound looks set to punish the dollar on a weaker yield curve outlook in the months ahead. The dollar index has slumped to 82.79 this morning.

Euro – On the day ahead of the release of stress testing results, the euro has rebounded sharply. Investors seem to have concluded that the publication might underscore the health of the financial system, which has concerned them for too long. The euro rebounded from a $1.2732 low inspired by Mr. Bernanke to reach $1.2879 on Thursday after data vilified ECB President Trichet. After a recent monetary policy meeting, the chief warned that outsiders were missing the strength of a rebound within the Eurozone during the second quarter. The release of expansive manufacturing activity today once again helped cast off that gloomy view.

The Eurozone’s composite PMI index reading for July rose to 56.7 with services and manufacturing equally heading further into expansive territory. Each index, however, was expected to decline in line with other readings from leading nations. The news was a surprise and along with the increasingly weaker tone to the dollar, the euro made sustainable gains. Further vilifying Mr. Trichet’s stance was an increase in new orders for industrial and manufacturing goods throughout May, which grew by 3.8% on the month to stand 22.7% higher than one year ago. The euro also rose to ¥111.66.

Japanese yen – Discussion continues to center on the strength of the Japanese yen and whether authorities will intervene to cheapen it. Today the yen reached ¥86.34 before investors took profits. More government and central bank officials warned today that the excessive yen gains of late were the biggest threat to the economic recovery. However, with consumers still responding to government encouragement to spend on electrical items, the recovery continues to head in the right direction.

British pound – A strong retail sales report encouraged belief that the economic recovery is sustainable and will whether the likely forthcoming loss of public sector job cuts. The pound rose to $1.5296 before profit-taking set in. Chief economist at the Bank of England confirmed the complications to the inflation profile as a result of the VAT increase set for next year. Spencer Dale reckons inflation won’t return to the 2% central target until 2011 as a result. The pound will likely win more friends as long as the recovery remains on track.

Aussie dollar – The Aussie flew overnight and reached its highest in nine weeks after investors jumped on the kangaroo having leapt through strong overhead resistance at 88.71 U.S. cents. The Aussie rose to as high as 88.98 at its best point of the day as risk aversion shone through. There was no data to inspire the move, which is likely the capitulation of several frustrated bearish bets on a risk aversion decline in the Aussie.

Canadian dollar – The Canadian dollar was also in demand as a commodity dollar this morning but faced the headwind of worse than expected retail sales during May. Forecasters called for a gain of 0.4% for the month but were disappointed by a decline of 0.2%. Sales excluding autos dipped by 0.1% having been expected to add 0.5%. A climb to 96.16 ran into trouble as the dollar slid to 95.54.

Investors Will Focus on the Advanced Q2 GDP, while the Earnings Season Continues

The United States economy is facing another important week, where investors will be waiting for the first GDP estimate for the second quarter, while investors will be also focused on companies’ earnings, as so far most companies reported rather strong results for the second quarter of 2010.

The start though will be with data from the housing market, where recent figures from the housing market suggested that activity was deteriorating over the past few months as a result of elevated unemployment, tightened credit conditions, and rising foreclosures, however, the new home sales are expected to rise in June, though we might witness some deterioration in new home sales.

The S&P/CaseShiller house price index will be also released, where the Composite-20 index is expected to show that house prices increased by 3.73% compared to a year earlier, while compared to last month, house prices were probably unchanged.

The housing sector suffered deeply after the termination of the government’s tax credit program which indeed boosted activity in the housing market, and once the program had finished, demand for houses declined noticeably.

The consumer confidence index released by the Conference Board is expected to show deterioration in confidence levels among consumers, however, the final estimate for the University of Michigan confidence is expected to show that consumer confidence rather improved.

Also, the durable goods orders are expected to have risen in Jun on both the headline index and the excluding transportation index, though given the recent development in economic conditions, we would expect the index to fail estimates, as demand levels from both consumers and producers seem to have faltered recently.

Meanwhile, the Fed’s Beige Book is not expected to provide anything new to the outlook, where Bernanke signaled in his testimony last week before the Congress that the recovery seems to be losing pace amid the ongoing challenges that continue to weigh down on overall economic activity.

Also, the Chicago PMI Index is expected to confirm the recent weakness demonstrated throughout the nation’s manufacturing activities, where we witnessed the slump in the ISM manufacturing index, which indeed signaled that manufacturing activities is also experiencing some deterioration.

Finally, the Advanced estimate for the Gross Domestic Product will be released for the second quarter, where expectations signal that the economy continue to grow over a slower pace in the three months ending June, as the GDP is expected to show that the economy expanded by 2.5% only, compared with the prior reported growth in the first quarter of 2.7 percent.

The U.S. economy clearly lost some momentum during the second quarter of this year, where activities in the manufacturing, services, and the housing sectors all started to ease, especially in May and June, nevertheless, the economy will continue to recover according to Fed’s Chairman, Ben Bernanke, who attested that the economy will slowdown but will not undergo a “double dip recession.”

Also this upcoming week, more U.S. corporations will announce their financial results for the second quarter of 2010, where among those we have Exxon Mobil Corp, Chevron Corp, Merck & Co Inc, AON Corp, Amgen Inc, First Solar Inc, Moody’s Corp, and several more others, and accordingly we should expect more fluctuations in financial markets, especially stock markets, where we witnessed last week huge fluctuations in stock markets, after some companies failed to meet estimates, while many others impressed.

London Gold Market Report

Gold Breaks $1200 as Europe's "Secretive" Bank-Stress Tests Fail to Reassure Investors

rose to a 5-session high above $1200 an ounce early Friday, showing a week-on-week gain for US, Euro and Japanese investors but holding unchanged against Sterling and Swiss Francs.

Government bonds edged lower as silver bullion held flat and crude oil slipped back through Thursday's 11-week high of $79 per barrel.

Yesterday's 2% gain on Wall Street – plus a strong rise in Asian stocks – failed to spur more than a 0.3% rise in European equities, as investors and traders awaited the "stress test" results on 91 regional banks.

"The correlations for gold prices are all over the place at the moment," says Phil Smith at Reuters Technical in Beijing, "and it is actually high-positive with the US Dollar – which is not normal.

"Breakdowns in 'normal' correlations generally point to a switch in the attitude to risk, and gold seems to be undergoing a rethink by some investors after its huge rally over the past years."

Undertaken by what the Associated Press calls the "the little-known" Committee of European Banking Supervisors (CEBS) here in London, "the release of bank stress-test results is unlikely to be the silver bullet that guarantees a rapid normalization of the financial system," says UniCredit's chief economist, Marco Annunziata, "given the recalcitrant and rather secretive way in which it has been prepared."

Rumors in the European press saw Greece's Atebank drop 4% of its value this morning, while Madrid's El Pais said Spain's "caja" savings banks were likely to fail.

"The ratio of Tier I capital, reserves and preferred stocks that an institution must hold to survive the stress test's assumed risks comfortably is 6%," says the paper, "although the legal requirement is 4% minimum."

A survey by Goldman Sachs of 376 professional investors and analysts said today that 10 of the 91 European banks tested may "fail", and so need to raise fresh capital from shareholders.

On the economic front today, Germany's Ifo business sentiment index came in sharply ahead of expectations, as did the UK's latest GDP data, showing 1.1% growth between April and July – the fastest pace in four years.

Both the Pound and the Euro jumped in London trade, nearing Monday's 11-week highs against the Dollar and driving the gold price down to £775 and €925 per ounce respectively.

"There is little doubt that the need to implement a credible medium-term fiscal consolidation strategy is valid for all countries now," writes European Central Bank chief Jean-Claude Trichet in today's Financial Times, concluding the newspaper's week of 'Austerity vs. Stimulus' debate.

"The ECB will contribute to consolidate a confident economic environment by ensuring price stability...Sound public finances are [also] a decisive component of economic stability and sustainable global growth."

Across in Washington on Thursday, however, "In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy," said US Federal Reserve chairman Ben Bernanke to the House Financial Services Committee.

The current bull market in gold bullion and other precious metals "is the direct result of the evident profligacy of governments the world over," says John Browne, senior market strategist at asset-management group Euro Pacific Capital.

"Spendthrift politicians in Washington, London, and Tokyo, have caused people to lose faith in paper currencies."

"Spiraling deficits, ballooning government debts and risk of eventual monetization" are all supporting gold prices, agrees BMO Global Commodities strategist Bart Melek, quoted today at MineWeb.

"The expectation that the Fed, the ECB and other central banks will largely be on hold well into 2011 are additional factors that are likely to keep investors buying gold and willing to pay a premium for the insurance properties the metal offers."

"We believe that US interest rates will remain low for much longer," wrote Walter de Wet at commercial and bullion bank Standard Bank yesterday.

Citing the Taylor Rule – which suggests interest rates "by balancing the Fed's two major targets, inflation and unemployment" – the Fed will keep rates at zero until "at least 2012," reckons the Standard Bank team, and "low rates in the medium term are bullish for gold, despite our view that inflation will remain low.

"Confidence in the strength of emerging-market currencies [also] indicates that risk appetite for precious metals may remain firm."