Wednesday, December 06, 2006


Markets Focused On Central Banks, Rates

The Associated Press reports on currencies. "The euro slipped briefly below US$1.33 on Wednesday, before rising again to hover near a 20-month high. In late afternoon European trading, the 12-nation currency stood at US$1.3313, down from US$1.3328 in New York late Tuesday, but above the US$1.3265 it fell to earlier in the day."

"The dollar edged upward after the Institute for Supply Management said Tuesday that its index of activity in the U.S. service sector had risen to 58.9 in November from 57.1 in Octobe, better than analysts had expected."

"The British pound slipped, and on Wednesday traded at US$1.9701, down from US$1.9743 on Tuesday. The dollar rose to 114.94 Japanese yen from 114.81 yen."

"Markets are looking ahead to policy meetings at the Bank of England and the European Central Bank on Thursday. The ECB is expected to raise interest rates, while the Bank of England is expected to hold rates, but to follow that with a statement that would signal higher borrowing costs in the future."

The International Herald Tribune. "When European Central Bank policy makers meet Thursday, the central bank's president, Jean- Claude Trichet, will face a most delicate task: making a convincing case that it will act decisively to head off higher inflation without roiling currency markets."

"More than ever, the intentions of central banks in the United States and Europe have become the chief driver of expectations in currency markets that have driven the euro above $1.33, a 20- month high against the dollar."

"The ECB has already given clear signals that it will lift borrowing costs Thursday by a quarter percentage point to 3.5 percent, its sixth such step since it abandoned a historically loose monetary policy one year ago in favor of higher rates."

"'The ECB has to become much clearer that its options for the next year are open,' said Jörg Krämer, chief economist at Commerzbank in Frankfurt. 'But it has to leave its basic bias to raise rates in place.'"

From MarketWatch. "Gold futures fell Wednesday, extending their losing streak to two sessions as the February contract closed at its weakest level in nearly two weeks, pressured by strength in the U.S. dollar. 'The fatigue we alluded to on Monday turned into a trip and fall,' said Jon Nadler, at bullion dealers And 'gold prices ran into further problems in...Wednesday trading, as a temporarily stronger dollar discouraged would-be buyers,' he said."

"Gold for February delivery fell $12 to close at $635.90 an ounce on the New York Mercantile Exchange, after falling to a low of $635.50, a level it hasn't seen since Nov. 24. The contract closed down $3 on Tuesday."

"Most of the trading volume has moved to the February contract, but the December contract remained as the official benchmark for gold futures trading. That contract closed down $11.80 at $630.50 an ounce."

"'Any shocks in tomorrow's ECB [European Central Bank] decision/speech or Friday jobs data could generate a greater move, potentially clearing $650 on the upside while leaving the downside vulnerable to a re-test of $600-$604,' said James Moore, an analyst at"

"silver followed gold prices lower. March silver shed 23 cents to close at a one-week low of $13.795 an ounce. It lost 1.5% in the previous session. March palladium fell $6.30 to end at $330.10 while January platinum shed $8 to close at $1,125.70 an ounce."

Is it just me or does a positive indicator in the service sector seem like a false positive? The ISM index numbers seem far more telling about the macro-economy in the long term than a green light in the services sector which would seem to have little bearing on the trade deficit. Its not a subject I'm very versed in, but on the surface a rise in the USD based on services data feels a bit like a suckers rally.
Iran May Reduce Use of Dollar, Tehran Papers Say
Seems Fleckenstein is convinced more than ever we are at the top ,and on the verge of a precipitous decline...
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