Euro, oil and metals pin hopes on ECB

  The Euro rallied one percent to a high of USD 1.2621 yesterday, close the two month high reached on 1.2638 on August 31st. The Euro is trading nearly five percent up from its low on USD 1.2042 on July 24th. Stock markets in US were flat while Asia trades up after four losing sessions on renewed hopes that the European Central Bank (ECB) may present new tactics to counter the region’s debt crisis. All eyes are on Maro Draghi and the statement the President of ECB is going to deliver later today hopefully outlining details on the bank’s much announced bond buying program.
The strength of the Euro came after a string of leaks from euro zone officials underpinning expectations that Mario Draghi will live up to its earlier statement. Draghi stated in early August that ECB would take whatever steps necessary to boost and save the Euro. The ongoing rally in the Euro has seen the dollar index plunge to its lowest level in three and half months. The Australian dollar which has been under constant pressure over the last couple of months, bounced back after presentation of a surprise fall in Australian jobless rate.

The ECB meeting is seen as crucial for both the bank and Mr. Draghi’s personal prestige. Draghi has pinned his authority on a bond buying scheme. Buying of Spanish and Italian bonds will ease the pressure especially on these countries interest rates and their striving economies. A renewed ECB intervention in the euro zone’s bond market would give the Euro governments some spelling relief and give them time to come up with a longer term response to the bloc’s debt crisis.

Oil prices have been falling over the last two days. The development in the oil prices also very much depend on the outcome of the ECB meeting. Brent crude trades at 113,50. The future development of Precious metal prices are also dependent on whether ECB is able to deliver according to market expectations. So The situation for precious metals is likewise. Gold prices trading at 1695, shall be given a boost upwards with a detailed ECB plan for buying of bonds. The same is the situation for silver which yesterday saw its highest level in weeks reaching 32.60.

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Euro-USD slips ahead of ECB

The Euro-USD slipped from its yesterday high, 1.2629, to 1.2537in Asian trading Wednesday morning. The Euro, nevertheless, demonstrated strength prior to the EC meeting tomorrow. The Euro bears who predicted a collapse in the single currency are not any longer the driving force in the markets. Whether the ECB will be able to live up to the expectations created over the last weeks, is a more complicated question. The best markets in this round can hope for is probably a strong signal of ECB readiness to intervene in the sovereign bond markets, and start buying Italian and Spanish short term bonds and not a detailed debt-buying plan.

The President of ECB, Mario Draghi, indicated that this might be in the cards when he told on Monday to European lawmakers that purchases of short term sovereign bonds to help burdened countries Spain and Italy, did not constitute a breach of European union rules. It represented an effort to stabilize the monetary situation and should not be interpreted as a state intervention in free markets. This has led critics to claim that Draghi is, too, much influenced by French Socialist President, Francoise Hollande, and Italy’s premier, Mario Monti. A final decision on ECB bond buying would most likely not be taken before the German constitutional court in the middle of the month decides on whether German participation in such bond buying is in accordance with the German constitution.

The US markets were weak after the opening after Labor Day. Manufacturing data fall for the third month in row painted a picture of a mixed, slow growing American economy stressing the need for quantitative easing measures. Stocks in Asia continue to be under pressure. Oil prices are down from yesterday’s peak. Brent crude is trading at 114 with NYMEX again tipping below 96. Gold is stabile at 1695 and silver at 32,20 demonstrates continued strength.

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Brent climbs to 116 on war rhetoric

 
Global markets taking monetary easing as a done deal continues to climb. Both oil and precious metal prices climbed to level not seen for the last months. Brent crude rose to 116, and gold flirting with 1700. Silver reached 32.20. EURO/USD is trading at 1.2617 making it likely that the EURO, in spite of a Moody down writing the Euro zone to negative, shall see 1,27 before the European Central Bank on Thursday will decide on whether to buy Spanish and Italian bonds aggressively.

The US markets were closed for Labor Day yesterday. The Asian markets were mixed going in and out of red territory. Oil prices were underpinned by expectations that weak data from China, the world’s second biggest oil consumer, would prompt Chinese authorities to ease credit policies further. Beijing has already taken decisive steps to encourage domestic consumption and lower interest rates. Israel’s stepped up war rhetoric against Iran, has increased tensions in the Middle East. This is impacting oil futures.

Gold and silver which are seen as hedges against unexpected moves in the currency market, are continuing to move upwards as are copper and soft commodities. Paring back of bearish bets against the Euro has probably helped bolster the single currency over the last days. There is also talk in the market that Asian players have been buying Euro against the Yen. The Japanese currency is stable against Dollar on 78,365. ECB President, Mario Draghi, stated yesterday that ECB purchases of sovereign bonds with up to three years maturity did not constitute state aid.

The Euro reached a two month high against the Australian dollar and rose 0,4 % against the yen. Investors continue to give the Australian dollar a cold shoulder on weaker growth in China and disappointing weak domestic retail sales.


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3 September 2012 | UWCFX daily Market Video Reviews

Bernanke keeps stimulus hopes alive

US Federal Reserve if necessary is prepared to take further steps to strengthen the economy. Bernanke’s speech gave commodity and precious  metals prices a strong lift.  US equity markets rose, MSCI is up in spite of Chinese manufacturing low level. Gold jumped USD 40 an ounce , silver also rose 3 % , oil prices  are  strong. Soft commodities continue to raise.  EURO/USD is trading at the highest levels seen in weeks. Japanese yen is strengthened since last week. This week markets are going to be concentrated on the ECB meeting.

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