The markets have taken a little bit of time warming to the results of the latest G20 meeting in Toronto; but from our perspective the developments should be broadly positive for risk appetite. The striking feature about the communiqué this time around was that leaders actually managed to come to concrete and specific targets rather than the vague non-committal fare that had made the previous meetings so uninspiring. Advanced economies have agreed to halve their fiscal deficits by 2013, and to rein in public debt as a percentage of GDP by 2016. Contrast this with the text of the last meeting in Pittsburgh which was still littered with promises to be “growth friendly” and to “provide flexibility to respond to new shocks”; and it seems that world leaders are more unified that the recovery is entrenched and that fiscal consolidation is now a priority. The rest of this week is likely to be slightly subdued by a lack of economic data releases; Friday is probably the most promising schedule with both the Riksbank decision and non-farm payrolls due; but the 4th July weekend straight after is likely to make FX markets sluggish, and anticipate a drop in liquidity during the US session.
EurUsd EURUSD looks to be on the path to further gains after breaking above its 1-week downtrend on Friday, and after a sluggish start from Asian equities this week we may be able to get in on a quick long trade on a dip back towards that trendline. Currently the back side of the downtrend is seen at 1.2300 so we’d be happy getting long there, setting a stop just below the 1.2260 support (which supported the pair during the latter part of last week), and looking for another visit to 1.2400 (overnight high 1.2406). Above 1.2400, the next resistance levels are eyed at 1.2468 (18 Jun and 21 Jun highs) the 50-day moving average at 1.2555, then the 1.2600 level last seen on 21 May. Should the re-test of the old downtrend break, then we still expect some protection at 1.2290 just below (where a very short-term uptrend comes in today), 1.2260 (as discussed above), 1.2209 (the low water mark last week) and 1.2170 (where the 15 Jun lows coincide with the 50.0% fibonacci retracement of 1.1827 - 1.2468).
GbpUsd As if we didn’t get have enough grief worrying about the England match, there was further frustration on Friday as we just missed the entry price where we had hoped to go long GBPUSD (1.4850), and instead after seeing it plunge as far as 1.4857, the pair rocketed higher to hit highs of 1.5073 – well in excess of our 1.5000 target. Grrr. Those highs and the current price both lie above the 100-day moving average (1.5039) and the 5-week uptrend channel we have been tracking on the hourly chart, but the extension higher has been limited by resistance around 1.5055 (10 May high). The psychologically important 1.5000 level below should now act as a support level for further gains, but be wary that any sudden plunge through there leaves very little support blow before 1.4850 again. On the topside, next resistance above 1.5073 is due at 1.5150 (top edge of a 3-week uptrend channel), then 1.5210 last seen 4 May.
UsdJpy The encouraging pledges from the weekend’s G20 summit has certainly stemmed the blood loss in USDJPY, but the overriding bear trend is still fully operational and likely to weigh on rallies in the short-term. The 89.15-25 area of support has been the platform for a small bounce this morning – but only as far as 89.46, and given the continued pressure on US yields we would not be surprised to see another dip to the vulnerable supports below; 88.95 (20 May low and lower edge of the 3-week downtrend), then 87.99 (low from 6 May). Expect price action to be very sticky through today’s highs (89.46), and around last week’s pivot level 89.75; with further sellers predicted around 90.00 and the 200-day moving average 90.87.
UsdChf After Wednesday’s short squeeze came to an abrupt halt at 1.1138 (identical to last Monday’s high), the bears have jumped all over this pair and the relentless downward pressure has now taken us all the way to lows of 1.0850. The downside now looks extremely vulnerable; with next support not anticipated until 1.0770 (where a shallow trendline support is eyed), then 1.0732 (2 May low), so really this looks like a sell-on-rallies- pair from here. Ideally, we would like to see a bounce back towards 1.0924 (the low from 10 May) to get in on the short trade; knowing that the 100-day moving average lies just above there at 1.0945 and decent selling interest is likely to lurk ahead of 1.0975 where the upper edge of our 3-week downtrend channel also comes in today.
Switzerland (Reuters) - Governments must slash budget deficits decisively and central banks should not wait too long to raise borrowing costs as side effects from measures prescribed to tackle the global recession may create the next crisis, the Bank for International Settlements said.
The global economy as well as financial markets were on the mend, though the recovery remained fragile in the advanced economies and in the euro zone the debt crisis put the recovery at risk, the BIS said in its annual report, published on Monday.
Global leaders meeting in Toronto agreed to take different paths for shrinking budget deficits and making banking systems safer and Washington in particular has warned against cutting too fast. But the head of the BIS said there was no time to waste.
"We cannot wait for the resumption of strong growth to begin the process of policy correction," BIS general manager Jaime Caruana told the bank's annual general meeting.
"In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress."
The BIS, which acts as a bank to central banks and a discussion platform for policymakers, said reforms of the financial system remained key to prevent further crises.
Top central bankers met at the BIS annual meeting from June 26-28 in Basel, following the G20 summit where leaders acknowledged the uneven and fragile economic recovery in many countries.
In a reversal from the unity of the past three crisis-era Group of 20 summits, the leaders left room to move at their own pace and adopt "differentiated and tailored" policies.
But the BIS warned powerful support measures had strong side effects and said their dangers were starting to emerge.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS report said.
FINE LINE
The BIS said if the extraordinary measures were kept in place for too long, policymakers ran the risk of creating "zombie" banks or companies, dependent on direct support.
But it acknowledged the tricky situation for policymakers as the stakes were high and the risks from capping lifelines too early loomed large.
Central banks especially were walking a fine line.
The banking system was still far from sound, as recent profits from fixed income and currency trading and the low interest rate environment were hard to repeat and not all crisis-related losses may have been booked.
"But the longer that policy rates in the major advanced economies remain low, the larger will be the distortions they create, both domestically and internationally," the BIS said.
Extremely low real or inflation-adjusted rates altered investment decisions, postponed the recognition of losses, increased risk-taking in the search for yield and encouraged high levels of borrowing, the BIS said.
In addition, central bankers may underestimate inflation risks as the crisis may have lowered potential growth rate.
Markets have pushed back expectations for rate increases in the United States and in the euro zone in the wake of the Greek debt crisis, and central bankers urged Europe to solve the crisis so as not to endanger uneven global recovery.
Speaking to Reuters on Monday, Jassim Al-Mannai, director general of the Abu Dhabi-based Arab Monetary Fund, said banks and policymakers had to beware of fuelling bubbles.
"We have to avoid, every economic authority, not to see bubbles. Our economic policy needs to be prudent, especially monetary and even fiscal policy," he said.
Challenges for emerging economies were different as they were recovering strongly and inflation was picking up, the BIS said.
"Some EMEs could rely more on exchange rate flexibility and on monetary policy tightening," the BIS said.
The Greek debt crisis had highlighted that many governments had to consolidate their finances immediately as highly indebted countries would not be able to rescue banks as a buyer of last resort in another crisis.
For the full report, click on the BIS website: www.bis.org
(Reporting by Sven Egenter; Edited by Mike Peacock)
* At a summit in Toronto on Sunday leaders of the Group of 20 adopted a more flexible timeline for banks to build up higher levels of capital and liquidity.
* The G20 leaders also agreed to take divergent paths on ways to trim budget deficits while ensuring that the global economic recovery remains intact, a reversal from the unity of the past three crisis-era G20 summits.
* Back at home President Barack Obama's efforts to win final approval in Washington for a historic financial regulatory reform bill looked more complicated on Saturday after a Republican senator threatened to oppose it.
* Oil touched its highest price in almost eight weeks on Monday, trading near $79 as tropical storm Alex forced Mexico to slow oil exports and some offshore U.S. producers to evacuate platforms and curb output.
* The dollar was on the defensive on Monday as investors sought to cut long positions built in favor of the greenback, while the euro held gains as the focus shifted to the sustainability of a U.S. recovery from the euro zone debt woes.
* Russian President Dmitry Medvedev called on Sunday for a special levy on oil companies to finance a fund to help clean up environmental disasters such as BP's (BP.L) oil spill in the Gulf of Mexico.
* Financial woes may force majority state-owned Dubai Aerospace Enterprise (DAE) to renegotiate some 220 aircraft orders with Boeing (BA.N) and Airbus (EAD.PA), French daily Les Echos said on Monday.
* Air China (601111.SS) (0753.HK) said late on Friday that it would buy 20 Boeing (BA.N) 777-800 airliners for $1.4 billion.
* Miners will be in the spotlight after the Australian government's hopes of defusing a damaging row over its planned mining tax hit a snag on Monday when the Greens party vowed to block any attempt to seriously water down the tax. New prime minister Julia Gillard, who replaced Kevin Rudd last week, wants to strike a quick deal with miners to neutralize the tax issue at this year's general election and shore up support for the ruling Labor party.
* On the macro front investors awaited the Commerce Department's May personal income and consumption data, due at 8:30 a.m. ET, and the Chicago Fed National Activity Index for May, due at 8:30 a.m. ET.
* Japan's Nikkei average edged down to its lowest close in more than two weeks on Monday as its technical picture darkened, with market players saying the next target could be the six-month low hit earlier this month.
* European stocks rose in morning trade, led by the banking sector as the G20 adopted a more flexible timeline for banks to build up higher levels of capital and liquidity. The FTSEurofirst 300 index .FTEU3 was up 0.8 percent at 1,021.61 points.
* In New York on Friday the Nasdaq and S&P 500 edged higher on relief that a U.S. financial regulation bill wouldn't crimp profits as badly as feared, while Oracle's strong results reignited hopes on corporate spending.
* The Dow Jones industrial average .DJI was down 8.99 points, or 0.09 percent, at 10,143.81. The Standard & Poor's 500 Index .SPX was up 3.07 points, or 0.29 percent, at 1,076.76. The Nasdaq Composite Index .IXIC was up 6.06 points, or 0.27 percent, at 2,223.48.
* The Dow fell 2.9 percent for the week, the S&P 500 was off 3.6 percent and the Nasdaq Composite fell 3.7 percent.
(Reporting by Blaise Robinson; Editing by Greg Mahlich)
(Reuters) - World shares firmed slightly after a four-day retreat on Monday with investors still cautious about global economic recovery and shrugging off the rather neutral conclusion to a weekend G20 leaders' summit.
The Group of 20 leaders meeting in Toronto agreed on Sunday to take different paths for cutting budget deficits and making their banking systems safer.
Most countries had contrasting priorities, reflecting the uneven economic recovery across the globe.
Worries have risen in recent weeks that the recovery is slowing, underlined on Friday by U.S. growth data that was less robust than expected.
This has led to fears that countries such as Germany and Britain are trying to cut their deficits too soon.
"There are some legitimate doubts. Government finances in most of the mature economies are really in trouble, so we have to do something about that. But it will probably pressure growth," said Luc Van Hecka, chief economist at KBC Securities.
MSCI's all-country world stock index was up 0.2 percent with its more risk-sensitive emerging market counterpart gaining 0.5 percent.
The main index had four days of losses last week following a 10-session rally. It is down 7 percent for the year-to-date, reflecting the first half's volatility over economic recovery and the euro zone's sovereign debt crisis.
European shares struggled to keep up early gains. The FTSEurofirst 300 was up 0.2 percent.
Earlier, Japan's Nikkei slipped half a percent, with prospects of a stronger yen weakening sentiment.
DOLLAR CALM
The dollar edged up after faltering in Asia on concerns about the U.S. economic recovery and the euro remained under pressure by euro zone debt concerns.
The market showed little reaction to the Group of 20 summit.
"It's mostly a compromise and nothing hugely material," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"The focus this week is on the recovery weakening, which is taking some upward momentum out of the dollar, most evident against the yen, as the euro remains hampered by its own issues."
The dollar was up 0.2 percent against a basket of currencies while the euro fell 0.1 percent to $1.2355.
Euro zone government debt yields were slightly higher.
(Additional reporting by Atul Prakash and Tamawa Desai; Editing by Toby Chopra)
LONDON (Reuters) - The dollar edged up on Monday after faltering in Asia on concerns about U.S. economic recovery, while the euro failed to make headway after a G20 summit failed to set markets alight.
The market showed little reaction to a Group of 20 leaders' summit where they agreed to take different paths to cutting budget deficits, a reflection of the uneven and fragile economic recovery in many countries.
"It's mostly a compromise and nothing hugely material," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"The focus this week is of the recovery weakening, which is taking some upward momentum out of the dollar, most evident against the yen, as the euro remains hampered by its own issues."
At 3:34 a.m. ET, the euro was down 0.1 percent at $1.2353. Near-term resistance was seen at $1.2490, the high struck on June 21, with support forming around Friday's low of $1.2254.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up slightly at 85.441 .DXY, holding above last week's low of 85.09 which is seen as near-term support.
A fall below 85.09 would take the index to its weakest since mid-May. Support below that was seen near the 55-day moving average at 84.80.
The dollar was at 89.36 yen, not far from a five-week low of 89.21 hit on Friday after first quarter U.S. growth data was revised down. It lost 1.3 percent last week, the third straight week of declines.
A raft of U.S. economic data this week, culminating with non-farm payrolls figures on Friday, will offer plenty of evidence about the state of the world's largest economy.
The dollar got some support in Asia from expectations that Japanese importers' bids were sitting below 89.00 yen, but options triggers below 89.00 yen could take it lower, traders said.
The latest data from the Commodity Futures Trading Commission showed currency speculators trimmed bets on the greenback and went long on the yen in the week to June 22.
SWISSIE ASCENDANT
The U.S. currency hit an eight-week low against the Swiss franc at 1.0895 franc on trading platform EBS, and hovered near a five-week trough versus the yen.
Market players feel comfortable about picking up the Swiss franc as the Swiss National Bank (SNB) backed off a pledge to fight excessive appreciation of the franc earlier this month.
SNB board member Jean-Pierre Danthine was quoted as saying on Monday deflationary risks had largely disappeared in Switzerland and Swiss exports have proven to be robust despite a strong Swiss franc.
Sterling remained above $1.50, hovering near its highest levels seen since early May struck on Friday.
(Graphics by Scott Barber; additional reporting by Rika Otsuka in Tokyo, editing by Mike Peacock)
(Reuters) - Oil eased below $79 a barrel on Monday, turning lower after prices touched their highest in almost eight weeks as tropical storm Alex disrupted Mexican exports and prompted some U.S. producers to evacuate platforms.
U.S. crude for August was down 40 cents at $78.46. It earlier rose as high as $79.38, the highest intra-day price since May 6. August Brent crude was down 42 cents at $77.70.
"It's profit-taking after the near two-month high and the failure to reach the $80 level," said Carsten Fritsch, an analyst at Commerzbank.
"The market is oversupplied. Other factors are supporting prices at the moment, in particular the tropical storm. But given the high level of stockpiles, any supply disruptions could be met easily as long as they are short-lived," he added.
Over the weekend Alex became the first named storm of the 2010 Atlantic hurricane season, which runs from June through November and which forecasters expect to be active and possibly match the record-breaking 2005 season.
European equities edged higher and the U.S. dollar was little changed against a basket of other currencies as investors assessed the implications of a G20 meeting. Gold rose to near its record high.
World leaders agreed on Sunday to take different paths for cutting budget deficits and making their banking systems safer, a reflection of the uneven and fragile economic recovery in many countries.
SOME U.S. GULF OUTPUT SHUT
Mexico closed two of its main Gulf of Mexico oil exporting terminals on Sunday as Alex moved over the Yucatan peninsula, the government said.
The ports of Cayo Arcas and Dos Bocas typically handle combined exports of more than 1.1 million barrels per day (bpd), or about 80 percent of Mexico's shipments abroad, which mainly head to U.S. refineries.
Shell Oil (RDSa.L) shut subsea production at two platforms, and BP (BP.L)(BP.N) evacuated some personnel from three Gulf of Mexico platforms, the companies said on Sunday.
The U.S. National Oceanic and Atmospheric Administration forecasts 14 to 23 named storms for this year's season, with eight to 14 developing into hurricanes. Three to seven of those could be major Category 3 or above hurricanes.
Traders and investors also are seeking evidence that the world's largest economy continues to recover. U.S. May personal spending data is due at 1230 GMT on Monday and June unemployment statistics are to be published on Friday.
(Reporting by Alejandro Barbajosa and Alex Lawler; Editing by Jane Baird)
The US dollar and yen are under broad pressure during the Asia-Pacific session after G20 leaders agreed to reduce their budget deficits while continuing to promote the global economic recovery.
According to a draft document over the weekend developed nations have agreed to cut budget deficits in half by 2013 and stabilize debt-to-GDP ratios by 2016. Leaders meanwhile will pledge to continue stimulus efforts to sustain the global economic recovery.
The G-20 agreement went further than some lawmakers had been expecting, according to German Chancellor Angela Merkel. Speaking to reporters after the meetings, Merkel said that the agreement to concrete targets on debt reduction was more than she expected the G20 to agree to.
However not all the focus lies on debt reduction. Earlier on Sunday, Chinese President Hu Jintao called on nations too coordinate policies to prevent the global economic recovery from stalling.
Also on Saturday, U.S. Treasury Secretary Timothy Geithner says the G20 meetings should be “fundamentally about growth”. He added that economic expansion will require different strategies for different nations.
G8 leaders were also busy over the weekend pledging to continue fighting protectionism and encourage free trade agreements.
According to a statement released following a series of meetings, the body agreed to continue pressing for the conclusion of the Doha trade talks, arguing that more free trade agreements would contribute to the global economic recovery.
There isn’t much in the way of key economic data coming on the horizon except for the U.S. Personal Income and Spending Report later in the day.
The recent equity market losses make for gloomy analysis, and coupled with renewed fears over US growth prospects, US Treasury yields have found themselves under immense pressure in the past week. For the currency trader, the decline in risk appetite should broadly favour the USD, but the drop in yields is something to keep an eye on in terms of USDJPY in particular. Historically there has been a decent correlation between Treasury yields and USDJPY, and unsurprisingly the activity in the Treasury market this week has coincided with a profoundly bearish downtrend for USDJPY that threatens another look at 88.00 levels. Should the pressure on yields continue, the JPY is therefore likely to outperform the USD, and expect EURJPY, AUDJPY and other JPY-crosses to give the most bang for your buck on the downside. Looking at today’s calendar, there is not a great deal to get inspired about; the only major economic release will be the third reading of US Q1 GDP; but no surprises are expected and the rate is likely to be confirmed at 3.0% QoQ annualized. The latest G20 summit is due to begin imminently in Toronto, but one can’t help but feel the bristle of excitement surrounding these meetings has waned considerably as past incarnations have rarely produced concrete outcomes. High on the agenda will be the various suggestions and recommendations for a bank tax or levy to address the need to recoup some of the costs of the financial crisis from its perceived perpetrators, but we certainly won’t be holding our breath for a unified agreement on that one. The wires will no doubt be cluttered with quotes from various politicians asserting their own views on the matter, but in the currency space this will likely play second fiddle to the Brazil-Portugal match this afternoon and Spain’s must-win clash with Chile later on.
EurUsd Morning all, after the thrills and spills of Slovakia vs. Italy yesterday, the developments in EURUSD over the past 24 hours seem rather humdrum. As nasty short squeeze across the EUR-crosses yesterday afternoon made light work of violating the 1.2328 resistance (23.6% fibonacci retracement of 1.1876 – 1.2468) and subsequently the 1-week downtrend around 1.2360; but as of yet we haven’t seen buyers gather enough momentum to sustain the break higher. We now perceive a very short-term uptrend that has been in play since the middle of this week, and which now threatens to overthrow the 1-week downtrend as the dominant short-term trend. Expect uptrend support at 1.2295-1.2300, and given the breach of 1.2350-70 once already, we predict another push higher through the 1-week downtrend at 1.2335, which should allow a second crack at yesterday’s high 1.2388 and 1.2450-70 (28 May high at 1.2452, recent double top highs 1.2468). Should the sell-off continue back through this uptrend (i.e. a resumption of the 1-week downtrend), next pockets of support are due around 1.2260 (yesterday’s lows), 1.2209 (the low water mark this week) and 1.2170 (where the 15 Jun lows coincide with the 50.0% fibonacci retracement).
GbpUsd The short/medium-term trend for GBPUSD remains upward, but as we anticipated, there was some paring back of recent gains in yesterday’s session. At the present time we linger towards the upper edge of 2 different uptrend channels which does not make fresh long entry attractive from a risk-reward perspective, so instead we look to wait for a deeper correction before buying back in. Those with itchy trigger fingers should probably hold fire until 1.4850 levels before re-loading longs, but for the more cautious, the next best area for buyers will be around trendline support currently 1.4780. This latter area does however, currently sit below Wednesday’s ledge of support at 1.4800 and the 50-day moving average at 1.4817, so we feel 1.4820-30 levels presents the best compromise (especially as the trendline support will only drift higher as the session progresses). 1.5000 still represents a major psychological barrier for rallies, but the latest surge to highs of 1.5012 does suggest to us it will not remain so for long. Above there the 100-day moving average is hovering at 1.5044 and the 10 May high at 1.5055.
UsdJpy The pressure on US Treasury yields has weighed heavily on USDJPY this week, and after the break of 89.80 crucial support, we have seen an extended collapse to lows of 89.23. Thus far the sell-off has been caught by demand around 89.26 (25 May low), but given the tremendously bearish tone of late we would not be surprised to see another dip to the vulnerable supports below; 88.95 (20 May low), then 87.99 low from 6 May). For the time being, price action will be very sticky above 89.75, with further sellers predicted around 90.00, the 200-day moving average 90.88, Monday’s 91.48 high, then last Wednesday’s highs at 91.82.
UsdChf After Wednesday’s short squeeze came to an abrupt halt at 1.1138 (identical to Monday’s high), the bears have jumped all over this pair and pushed it below 1.1000, touching a low of 1.0985. Our directional bias in the very short term is neutral (with a bearish preference in the medium-term), so we would expect a bounce off this 1.0985-1.1000 support, then look to sell rallies towards 1.1138. We ultimately believe that after this period of consolidation, the bearish trend will extend further; next major support is expected at 1.0924-44 (10 May lows and 100-day moving average) – and as such should be respected as a likely platform for a rebound on the first visit.
MORNING BRIEFING: G20 outcome fails to impress forex markets
What’s new: G20: Diverging paths to fiscal consolidation but common specific targets G20: Japanese current fiscal situation acknowledged as the exception Japan: Retail sales data come below expectations New Zealand: NZD suffers as business confidence data shows decline EURUSD: Range-bound morning trading; attention shifting to US economic recovery
Today:
Rates in Asia and Indices: EURUSD: 1.2397 - 1.2351. USDCHF: 1.0944- 1.0890. GBPUSD: 1.5072 - 1.5020. EURJPY: 110.82 – 110.38. USDJPY: 89.45 – 89.27. DowJones: 10'143.81 -0.09% NASDAQ: 2'223.48 +0.27% S & P 500: 1'076.76 +0.29% Nikkei: 9’693.94 -0.45% Shanghai: 2'535.27 -0.69% Gold: $ 1'254.10 Crude Oil: $ 78.66
Comments: Currency markets reaction to G20 outcome seems to have been muted this morning. Despite hanging on to their own path for cutting budget deficits, G20 leaders have communicated their vow to halve fiscal deficits by 2013 and to ensure that public debt as a percentage of GDP stabilizes or declines by 2016. These are very specific targets as opposed to previous generic statements. They acknowledged the risk this might have on short term economic recovery, but highlighted the necessity to restore confidence and longer term stability.
It was pointed out that Japan’s situation was different in nature, and meeting the mentioned specific debt reduction targets would be impossible – the Japanese government committed to eliminating fiscal deficit by 2020, which was welcomed and understandable. G20 Countries with greater deficit agreed to boost savings whilst the other export oriented countries agreed to foster more domestic growth to reduce their reliance on exports. As expected no consensus was reached for the bank levy.
In the 2nd largest economy; Japanese retail sales data was disappointing as figures were weaker than expected. Analysts have expressed the possibility that the previous boost in sales was helped by government subsidies which effect is starting to slow as they are expected to expire later on this year.
In New Zealand data for business confidence fell, suggesting that the central bank would be more cautious in raising interest rates. As a result of the NZD was losing support this morning.
EURUSD traded in a tight range as trading was limited in between 1.2351 to 1.2397 which levels are the respective low and high for this morning. It seems that as some of the attention for Euro Zone Debt problems shifts to US economic recovery, the US Dollar suffers from cuts in long positions and the Euro is managing to hold on to its gains.
Defensive play is the focus as double dip fears mount amidst an ongoing precarious debt situation in Europe in which funding is once again the key issue. Some relief came this morning for bankers since they seem to have won their battle to soften Basel III reforms managing to have proposals forcing banks to retain longer term net stable funding ratios scrapped.
[B]Relative Performance Versus the USD on Friday (as of 9:30GMT) - [/B]
Risk aversion had eased mildly at the European open which saw regional bourses open brightly despite another poor day for over-seas equity markets. However, the savage late sell-off on Wall St. yesterday and hefty losses in Asia over-night started to weigh on sentiment in Europe and has seen markets reverse their opening gains.
There is little to drive trade in Europe today which has been relatively quiet as players wind down positions ahead of the G20 over the weekend. EU’s Rehn was out early talking up the summit saying he is confident a framework can be agreed on to tackle the debt crisis. EU’s Barroso weighed in saying that deficit cuts are the way forward, but says timings can differ. Traders focusing on the G20 are concerned that world leaders will not able to unite, and tackle the crisis in a coordinated fashion.
The Australian and New Zealand dollars have been the big losers in such risk averse trade as signs of a slowdown in the global recovery weigh on the antipodeans. The Aussie is also being weighed upon by comments by PM Gillard who has indicated that the mining tax won’t be canned outright but rather tweaked, disappointing market expectations that the controversial 40% tax would be scrapped. The Pound has also been taking a beating as players adjust positions ahead of the weekend and exit long positions after cable failed to breach 1.5000 convincingly.
On the data front, the German import price index came in better than expected, French GDP was bang on consensus estimates and Italian hourly wages showed mild improvement.
Looking ahead, US GDP (3.0% expected) and personal consumption (3.5% expected) are due at 12:30GMT and U. of Michigan confidence (75.5 expected) is due at 13:55GMT capping off data for the session. US equity futures have reversed earlier gains to point to a lower open, gold continues to trade sideways while oil is weaker.
(Reuters) - Gold was buoyed on Friday by investors looking for refuge from financial market uncertainty and concerns about currency depreciation as the market waited for the outcome of a G20 meeting.
Spot gold was bid at $1,246.65 a troy ounce at 1115 GMT from $1,244.05 an ounce late in New York on Thursday. The metal earlier hit a session high of $1,247.15 an ounce.
Markets were watching the cost of protecting Greek government debt against default, which rose to a record high on Friday, raising fears about default and a sell-off of Spanish and Portuguese debt, also seen to be vulnerable.
"Nobody is giving up on gold, there is too much uncertainty in the world," said Andrey Kryuchenkov, analyst VTB Capital.
"Gold is trading like a currency, people are not ready to liquidate their holdings, they are using price dips as buying opportunities -- that was the case at $1,230 support."
Gold has over the past couple of years benefited from perceptions that governments were quietly trying to depreciate their currencies to help boost exports and growth.
Markets are marking time and trading could remain subdued as the market waits for the conclusion of the Group of 20 leaders' summit this weekend.
Disagreements about the best way to ensure both growth and fiscal responsibility could add to gold's appeal.
"If the markets don't like what they hear, we could see another run higher in gold and probably new record highs," a trader said.
HEIGHTENED PREFERENCE
Spot gold hit a record high of $1,264.90 on June 21 and U.S. futures touched a contract high of $1,264.80 an ounce on the same day compared with $1,246.50 on Friday.
"(With) U.S. rates set to remain low for some time gold will likely gain further support and maintain its longer up-trend," TheBullionDesk.Com said in a note.
Earlier this week the Federal Reserve acknowledged the faltering pace of recovery in the United States, the world's largest economy, and renewed its pledge to hold interest rates at very low levels for a long time.
That decision has a two-fold effect on the gold market. It dampens dollar sentiment, keeps it under pressure, which boosts demand for gold.
Low or zero interest rates also mean there is no opportunity cost for holding gold, which earns no interest or dividends.
These two factors partly explain why holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust rose to a record high at 1,316.177 tons as of June 24 from the previous high of 1,313.135 tons on June 22.
"We expect the increased importance of investment demand to persist as investors continue to display a heightened preference for less opaque assets following the global financial crisis," National Australia Bank said in a note.
The Fed's downbeat statement has also weighed on industrial precious metals silver, used in electronics, and platinum and palladium used to make autocatalysts.
Spot silver was at $18.67 an ounce from $18.65 late in New York on Thursday, platinum was at $1,561.50 from $1,557.50 and palladium at $471.50 from $471.00.
(Reuters) - Worries about the fragility of global economic recovery hit financial markets again on Friday, knocking world stocks down for the fourth session in a row ahead of a summit of Group of 20 nations.
Currency traders also sold higher-yielding currencies.
Investors have pulled back a bit from riskier assets this week as evidence built that economic growth, particularly in the United States, may be slowing.
This has combined with fears that the spending cuts and tax rises being promulgated by European governments to cut debt will hurt the recovery.
G8 leaders meeting on Friday in Canada -- turning into the G20 on Saturday -- are set to grapple with this issue with Washington warning against cutting too far and too fast.
"The cohesion generally evident among policymakers in dealing with the global crisis is in danger of giving way to a more divisive debate about how to manage the recovery," Credit Agricole analysts said in a morning note to clients.
MSCI's all-country world index .MIWD00000PUS was down 0.2 percent, heading for a 2.7 percent weekly loss. Its emerging market counterpart .MSCIEF was down 0.6 percent.
European shares were bucking the trend, however, with the FTSEurofirst 300 .FTEU3 up 0.3 percent after three days of losses.
But the mood was still cautious.
"No one is really wanting to take any big positions ahead of the G20," said Justin Urquhart Stewart, director at Seven Investment Management.
Earlier, Japan's Nikkei average fell 1.9 percent.
DOLLAR CALM
The dollar made little headway in subdued trade ahead of the G20 leaders' summit and the yen held near the one-month highs it hit against the U.S. currency on Thursday.
"It's a little bit of a strange situation as the euro should usually suffer more in periods of risk aversion, but we are seeing some position adjustments ahead of the G20," said Roberto Mialich, currency strategist at Unicredit in Milan.
The euro was flat on the day at $1.2330. The dollar was flat against a basket of currencies .DXY.
Euro zone government bond yields were also flat. (Additional reporting by Joanne Frearson and Tamawa Desai, editing by Mike Peacock)
(Reuters) - The yuan climbed on Friday to its highest since its July 2005 revaluation after the central bank set the daily reference rate at a post-revaluation high in an apparent goodwill gesture ahead of the G20 summit.
But trade was sluggish with market players cautious over how much the yuan could appreciate in the near term, despite a gain so far of 0.5 percent in the first week after China's weekend announcement of a depegging from the dollar, marking the biggest weekly gain since December 2008.
Weekly volatility in the spot yuan rate versus the dollar hit its highest since mid-2008, when China repegged the yuan to the dollar to help ease the impact of the global financial crisis on its economy.
Spot yuan's range for the week ran to 416 pips and averaged more than 200 pips per day, compared with moves of only a few pips per day during the two-year dollar peg.
Many dealers expect two-way volatility to remain the norm after China's weekend currency policy reform, although the yuan's rise will not likely be enough to satisfy U.S. lawmakers and other critics who want the yuan to rise as much as 40 percent. China is not expected to accept such a demand.
"Beijing told us that any appreciation would be gradual, and that is what is happening, with the reference rate for the yuan against the dollar today set little more than half a percent stronger than where it was last Friday," said Brian Jackson, strategist with Royal Bank of Canada in Hong Kong.
"But the rest of the G20 was not born yesterday, and there may be some suspicion that the move over the last week was just window-dressing to take the exchange rate issue off the top of the agenda at this weekend's summit," he said.
"To reduce the risk of trade tensions, we will need to see further yuan gains in the days and weeks ahead."
A Reuters poll of 33 economists projected that China would be true to its word and prevent a sharp rise in the newly unshackled yuan, with a median forecast of a 2.4 percent rise over the next year from the level before depegging.
The yuan gave up some early gains to trade at 6.7926 to the dollar at midday, still up from Thursday's close of 6.7997 but lower than Friday's central bank mid-point of 6.7896, which was up sharply from Thursday's mid-point of 6.8100.
MIXED SIGNALS
U.S. administration officials and some lawmakers appear to have differing views over the initial rise in the yuan.
U.S. President Barack Obama said in Washington on Thursday that China had made progress by announcing greater currency flexibility, but it was too early to tell if the yuan's rise would be enough to help rebalance world growth.
"We did not expect a complete 20 percent appreciation overnight, for example, simply because that would be extremely disruptive to world currency markets and to the Chinese economy," Obama said.
A U.S. lawmaker said on Thursday, however, that the United States should keep open a bill that would pressure China to raise the value of its currency.
"I think we need to keep that legislation on the burner. I think whether we act on it will be affected by what China does," House of Representatives Ways and Means Committee Chairman Sander Levin told reporters.
China announced over the weekend that it would allow the yuan's exchange rate to move more freely but it has made it clear that its currency reform would be gradual and controllable.
It is widely believed in the domestic market that China will not make any further concessions and that fresh pressure from U.S. lawmakers would very likely backfire due to more volatile market and economic conditions since the global financial crisis.
The euro zone's debt woes have cast doubt on the pace of China's economic recovery, reminding Beijing how vulnerable the world's third-largest economy is to a global slowdown.
Chinese economists often argue that Western critics underestimate that vulnerability, especially given how far China's per capita income lags developed countries.
They say it may be inappropriate to apply Western standards to the currency of a country whose per capita GDP is only one-20th that of the United States.
Caution about Beijing's stance was reflected in the offshore forwards markets. Benchmark dollar/yuan one-year non-deliverable forwards (NDFs) rose to 6.6750 bid by midday from Thursday's close of 6.6670, with implied yuan appreciation over that period falling to 1.72 percent from 2.14 percent the previous day.
(Reuters) - Oil slipped on Friday, heading for a weekly drop of 1.2 percent, as falling Asian equity markets tempered an early boost from indications that the first storm of the Atlantic hurricane season might be developing.
Asian stocks slid on Friday for a fourth straight session, driven by expectations of tighter financial regulation and uncertainty about the global economic recovery ahead of the weekend G20 meeting. Concerns about the Greek debt crisis had also sent Wall Street lower on Thursday.
"Overall the market is still caught in a tight range between $70 and $80 and I don't see any reason to break that range, just like the stock market," said Keichi Sano, general manager of research at SCM Securities in Tokyo.
U.S. crude for August shed 23 cents to $76.28 a barrel at 0715 GMT, heading for the first weekly decline in three weeks. Still, prices are up 18 percent from a trough below $65 on May 20. ICE Brent for August fell 32 cents to $76.15.
"The U.S. economic data is not so good for the last couple of days, so that is a bearish factor," Sano said.
U.S. durable goods orders reported Thursday were not robust enough to dispel doubts about the U.S. economy or the negative effect of the Federal Reserve's cautious outlook on growth.
SEASON'S FIRST STORM
The U.S. National Hurricane Center late on Thursday said that a weather system headed toward the Gulf of Mexico may develop into a tropical cyclone, assigning a probability of 60 percent for it to reach that status in the next two days, up from 40 percent earlier.
Weather models project the system will cross Mexico's Yucatan Peninsula from the Caribbean over the next few days, re-emerging in the gulf, where both Mexican and U.S. offshore oil production facilities are concentrated.
Most forecasts expect the weather system to hit the coast near the Texas-Mexico border, with Mexican oil fields producing more than 2 million barrels per day (bpd) near its path.
But some models expect the wave to turn toward Florida and the eastern Gulf of Mexico, closer to U.S. offshore production and where BP Plc (BP.L) is trying to clean up the biggest oil spill in U.S. history. The tropical depression would be named Alex.
"If a hurricane comes in line like Katrina and Rita, then that would be a big problem," Sano said, referring to the two 2005 hurricanes which virtually paralyzed the U.S. gulf industry for weeks.
"If the hurricane hits refineries, that would cause shutdowns and lower utilization rates and that could naturally cause higher product prices."
The Atlantic storm season may be the most intense since 2005, the U.S. government's top weather agency said last month.
In its first outlook for the storm season that runs from June through November, the National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with 8 to 14 developing into hurricanes, nearly matching 2005's record of 15.
(Reuters) - The dollar made little headway on Friday in subdued trade as traders marked time ahead of a Group of 20 leaders' summit this weekend, but remained wary about chasing riskier assets given debt and growth worries.
The yen held near one-month highs against the dollar hit on Thursday.
Market players were wary of a lack of consensus at the G20 summit with open disagreements about how quickly to shrink government deficits, how best to strengthen banks so they can withstand any new downturn, and how to harmonize financial regulatory reforms.
"It's a little bit of strange situation as the euro should usually suffer more in periods of risk aversion, but we are seeing some position adjustments ahead of the G20," said Roberto Mialich, currency strategist at Unicredit in Milan.
"The yen and Swiss franc are expected to stay firmly bid on the back of risk aversion," he said.
By 0743 GMT, the euro was flat on the day at $1.2330, with a downside target seen around the $1.2150/1.2200 area. Resistance was seen near the week's high of $1.2490.
Traders will also keep an eye on stock markets for direction as the euro remains highly correlated with the S&P 500 index .SPX at a solid 63 percent.
S&P 500 stock futures were 0.3 percent higher in early European trade. European shares also gained .FTEU3 after Tokyo's Nikkei stock average .N225 dropped 2 percent.
DOLLAR STRUGGLES
While the dollar is normally seen as a safe haven, it has struggled to rise after the U.S. Federal Reserve earlier this week gave a less optimistic view on the economy and reiterated interest rates would remain low for an extended period.
Concerns about any fallout for U.S. banks, as U.S. lawmakers sought to finalize financial reform bills, also kept the greenback on the back foot.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was little changed at 85.67 .DXY. Support was seen near the week's low of 85.09.
The dollar stood at 89.66 yen after hitting a 1-month low of 89.22 yen on trading platform EBS on Thursday.
Dollar/yen options barriers at 89 yen and below are likely to check gains for the Japanese currency in the near-term but some traders said momentum indicated the yen would eventually test the year's high of 87.95 yen hit on May 6.
Declines in Asian shares prompted yen buying against other currencies as investors pared back risk.
"It's all about cutting risky positions with falls in yen crosses leading the market," said a trader for a Japanese trust bank.
G20 discussions on currency issues, particularly the Chinese yuan, may have been deflected somewhat as China took steps last week to de-peg its currency.
On Friday, China's central bank set the yuan's daily mid-point at 6.7896 per dollar, the highest level since the July 2005 revaluation. It meant China has allowed its reference rate to rise 0.6 percent this week.
"It was tactical of China to move ahead of the G20 to rule out further pressure about its currency," Unicredit's Mialich said.
The Australian dollar pared gains to trade down 0.3 percent at $0.8642.
(Additional reporting by Rika Otsuka in Tokyo, editing by Mike Peacock)
EURUSD was surprisingly quiet yesterday, despite the US Federal Funds Rate decision on Wednesday. The pair traded in a 130 pip range, closing the day slightly upward at 1.2329. The Federal Reserve Bank decided to maintain the country’s interest rate level at 0.25%. The Fed has kept the benchmark rate near zero since December 2008, despite recent talks that there would be an exit strategy for the central bank. Following the FOMC conservative statement on Wednesday, many analysts have pushed back their estimates for the next interest rate hike. Meanwhile all US indices fell yesterday. The Dow Jones Industrial Average dropped 1.41% to close the day at 10,152.80. S&P500 plunged 1.68% finishing the day off at 1073.69 and the NASDAQ dived 1.63% to 2217.42. US monthly Core Durable Goods Orders was released worse than expected at 0.9% contrary to the expected rise of 1.1% however still better than the previous -0.8%. The standard release of the Unemployment claims in the US came out better than the expected 461k. Only 457k US citizens claimed unemployment in the week ending June 19th an improvement of 19k people from last week.
The market is relatively quiet in terms of economic data today. Today will be the start of the G8 meetings, to be continued over until tomorrow. And Saturday, the G20 meetings will begin. In the US Final GDP should remain unchanged at 3.0% and the revised University of Michigan Consumer Sentiment is predicted to stay put at 75.5point.
No volatility is anticipated in the markets today as traders are awaiting the outcomes of the G8 and G20 meetings.
MORNING BRIEFING: Market’s negativity weighs on the markets today
What’s new: United States: Lawmakers seem to be close to approve new bank regulation G20: Summit ahead, some divergence seen on bank tax and speed of fiscal clean up Japan: CPI lower for the 15th consecutive month Asia: Asian equity started off negatively today
Today:
Rates in Asia and Indices: EURUSD: 1.2343 - 1.2297. USDCHF: 1.1047- 1.0999. GBPUSD: 1.4974 - 1.4916. EURJPY: 110.67 – 110.03. USDJPY: 89.71 – 89.41. DowJones: 10'152.80 -1.41% NASDAQ: 2'217.42 -1.63% S & P 500: 1'073.69 -1.68% Nikkei: 9’719.60 -2.10% Shanghai: 2'548.10 -0.73% Gold: $ 1'242.25 Crude Oil: $ 76.26
Comments: There seem to be a taste of pessimism today; the perceived riskier assets EUR, AUD and NZD found less support, Asian equities started off negatively early morning.
Growth prospects remain shaky on the continued mixed data we get from the United States and other economies. Even European debt is in the limelight again as Greek credit default swaps hit new record highs. Globally talks on increased bank regulation have given markets new concerns as late yesterday US lawmakers were agreeing to ways of limiting banks’ trading activity aimed at prohibiting risky trading activity.
Looking at the upcoming G20 summit due this weekend, it appears that countries are split on the need for a bank tax. Even when it comes to fiscal consolidation, though there seems to be agreement that targeting fiscal consolidation is a must – US cautions countries should not rush austerity measures and thus risk short term growth; while on the other hand in Europe: Germany, France and United Kingdom have set ambitious targets for reducing their debt levels aggressively. ECB’s Trichet is dismissing that austerity measures could trigger stagnation.
In Japan CPI data was down again for the 15th month. Analysts are starting to doubt Government’s goal ending deflation next year and BOJ’s forecast of a rise in CPI by 2012.
Looking at the EURUSD pair even though Euro maybe seen as losing steam it has at least managed to maintain the 1.22 level since 15th June. Market sentiment seems to favour a downside today, but since it has not yet breached the significant 1.2150 level upside cannot be ruled out completely. To the downside significant resistance seen at 1.2269 (the 23.60% Fibonacci retracement level ) below that 1.2245 and 1.2150 are the following key support levels. Possible targets for the upside are 1.2430/1.2450 as seen on the hourly and four hourly charts.
Today’s economic calendar is a light one, markets set to move on sentiment.
(Reuters) - President Barack Obama said on Thursday China had made progress by announcing greater currency flexibility, but it was "too early to tell" if the yuan's rise would be enough to help rebalance world growth.
Obama, speaking at a joint news conference with visiting Russian President Dmitry Medvedev, said initial signs were positive, and the gradual change witnessed so far in the currency's value against the dollar were no surprise.
"We did not expect a complete 20 percent appreciation overnight, for example, simply because that would be extremely disruptive to world currency markets and to the Chinese economy," Obama said, making plain he welcomed the decision.
"I think China made progress by making its announcement that it is going to be returning to its phased-in, market-based approach" to the currency, Obama said.
In a move intended to defuse likely criticism at the upcoming Group of 20 summit for its currency policy, China on Saturday announced it would allow more flexibility of the yuan, which had been tightly pegged against the dollar for the last two years.
U.S. lawmakers claim China is stealing precious American jobs by keeping the yuan artificially low against the dollar, which makes Chinese exports to the United States cheaper and U.S. exports to China more expensive in dollar terms.
As a result, Congress is weighing legislation to encourage Beijing to let the yuan rise. House of Representatives Ways and Means Committee Chairman Sander Levin said this should remain an option if the currency did not move fast enough.
Obama is under pressure in an election year to fight for American workers. But he needs Chinese cooperation in other areas important to U.S. interests, like pressuring Iran and North Korea for their nuclear programs, and has opted for quiet diplomacy with China on the highly delicate issue of the yuan.
G20
Both leaders are heading to the Group of Eight and Group of 20 rich and developing nations, which meet in Canada June 25-27 to review the outlook for global growth.
The yuan ended higher against the dollar on Thursday at 6.7997, up from Wednesday's close of 6.8124. But dealers said there was no sign that the People's Bank of China was encouraging a sharp rise in its currency.
Obama, who must weigh whether he characterizes China as a currency manipulator in a report to Congress, said only time would tell. But he hinted a year was a reasonable benchmark.
"The initial signs were positive. But it is too early to tell whether the appreciation, that will track the market, is sufficient to allow for the rebalancing that we think is appropriate," Obama said.
"If that trajectory indicates that over the course of a year, the (yuan) has appreciated a certain amount, that it is more in line with economic fundamentals, then hopefully not only will that be good for the U.S. economy, that will also be good for the Chinese economy," he said.
The peg has contributed to a massive surplus in the Chinese trade account with the United States, which economists fear is an unsustainable imbalance that could renew global financial instability if it undermined dollar confidence.
Economists argue the yuan is undervalued against the dollar by as much as 40 percent.
The regular congressional report was delayed from its April publication date until after the G20. Obama said he would leave the decision on whether to cite China for currency manipulation to U.S. Treasury Secretary Timothy Geithner, but reiterated his argument the yuan was being kept too low.
"We have said consistently that we believe that the (yuan) is undervalued, that that provides China with an unfair trade advantage, and that we expect change," he said.
Action by Congress could embarrass Beijing and complicate relations with Washington.
Senator Charles Schumer and co-authors of the most prominent version of the China currency bill say their legislation enjoys overwhelming support.
But it is not clear where that bill might fit in a crowded legislative agenda or whether it would face a veto by Obama, who so far has focused on diplomacy to advance the U.S. goal of getting China to cut its huge trade surplus.
(Additional reporting by Matt Spetalnick, Jeff Mason and Paul Eckert in Washington, Editing by Frances Kerry and Cynthia Osterman)
(Reuters) - Gold rallied toward $1,250 an ounce on Thursday, gaining nearly 1 percent as the renewed sovereign credit risk and an equity market slump prompted investors to pile into safe-haven assets.
The metal jumped $10 early in the session as U.S. stock markets tumbled to session lows on economic worries. Bullion has recouped the previous session's losses due to a less optimistic growth outlook from the Federal Reserve and lackluster housing data.
Lingering fears over European credit contagion pressured markets, traders said. Greece's finance minister called for "great moves" to safeguard the banking system and European policymakers defended austerity plans ahead of a G20 summit.
"When there is uncertainty in the market, people tend to go to gold as a safe haven in a flight to quality," said Jeff Pritchard, analyst at California-based broker Altavest.
Spot gold was at $1,245.05 an ounce by 2:30 p.m. EDT (1830 GMT), versus $1,235.20 late in New York on Wednesday. U.S. August gold futures settled up $11.10 at $1,245.90.
Having hit a record $1,264.90 on Monday, prices have struggled to make further headway, which has left the market prone to short-term setbacks.
Gold came under pressure earlier as it reestablished its traditional inverse correlation with the dollar .DXY, and the link strengthened later as the U.S. currency fell.
Year-to-date, the euro has dropped about 14 percent amid questions about the viability of the common currency after a flurry of sovereign credit downgrades.
"It's a central theme and a lot of what we've said about gold is that the credit problems on the sovereign side are the main driving force behind the rise in gold right now," said Nic Brown, senior analyst at Natixis.
The unfolding sovereign debt crisis in Europe remained in focus as index-linked fund managers ditched Greek government bonds, widening the spread between Greek yields and other benchmarks and increasing the cost of insuring Greek government debt against default.
"There is a total lack of confidence in fiat currencies. So, people chose to take money to safer haven which is primarily gold and silver, which tend to do better than most other commodities in retaining their value in times of crisis," said Michael Daly, gold specialist at Chicago-based futures broker PFGBest.
U.S. stock markets fell sharply for a second straight day after the Fed acknowledged a faltering pace of U.S. economic recovery on Wednesday as it renewed a vow to hold benchmark interest rates exceptionally low for an extended period. .N
A drop in weekly U.S. initial jobless claims and a rise in big-ticket manufactured goods offered some hope about the fragile economic recovery. But the market still believes U.S. interest rates will remain low.
"Low interest rates are generally good news for precious metals. We believe that the Fed and the ECB (European Central Bank) will remain on hold for quite some time because of the European debt problems," said Tobias Merath, an analyst at Credit Suisse.
Technical analysts were upbeat on the market's ability to breach new highs, despite its current lack of traction.
Altavest's Pritchard said gold is trading sideways in an "ascending triangle" pattern, and prices could breach their upward channel.
In other precious metals, platinum was at $1,565 an ounce versus $1,566.00 on Wednesday, while palladium was at $475 from $471.00, having earlier fallen as much as 2.3 percent.
Supply worries boosted sentiment for platinum group metals after a union representing workers at South African utility Eskom won the right to begin a strike that could disrupt power supply and hurt industry and mines during the soccer World Cup.
Silver rallied in line with gold, rising to $18.70 an ounce from $18.45 the day before.
(Additional reporting by Amanda Cooper and Veronica Brown in London; editing by Jim Marshall)
MORNING BRIEFING: Investors’ concern on global economic growth resurfaces
What’s new: United States: Data for home sales comes lower than expected Asia: Asian equity indices in negative territory this morning Yuan: Initial enthusiasm starts to fade United States: Top officials caution G20 countries of rushing to adopt fiscal discipline Forex: Support for Euro, AUD & NZD decreases; USD & JPY enjoy greater support Federal Reserve: Main event tonight FOMC rate decision
Today:
Rates in Asia and Indices: EURUSD: 1.2296 - 1.2244. USDCHF: 1.1098- 1.1056. GBPUSD: 1.4877 - 1.4802. EURJPY: 111.21 – 110.71. USDJPY: 90.58 – 90.34. DowJones: 10'293.52 -1.43% NASDAQ: 2'261.80 -1.19% S & P 500: 1'095.31 -1.61% Nikkei: 9’941.81 -1.69% Shanghai: 2'561.74 -1.04% Gold: $ 1'239.10 Crude Oil: $ 77.87
Comments: Data for US home sales yesterday came out lower than expected, and this continued to exacerbate market’s negativity. In fact Asian indices were in negative territory this morning, triggered by a renewed concern on global economic growth. Even the slow moving Yuan has dampened previous enthusiasm that the long awaited de-pegging was to bring about a major change.
In a wall street journal article, US Treasury secretary Timothy Geithner and white house advisor Summers caution G20 countries of rushing to enact aggressive austerity measures as they might jeopardize economic growth. They went on to say that demonstrating a commitment to reduce long term deficits is a must, but one should not undermine short term growth. Referring to the bank levy agreed upon by Germany, France and the United Kingdom - they called for efforts from individual G20 countries to be in line with the rest of the group as opposed to having differing initiatives.
As demand for riskier assets waned greater support was seen shifting to the ‘safe haven’ currencies. The Euro, Australian and New Zealand Dollars saw a decaying support, consequently the USD and JPY found greater support. The USD found greater support due to it being envisaged as a ‘safe haven’ alternative, and the JPY gained support on the back of its funding function.
A main event tonight is the FOMC meeting, markets are expecting the fed to prolong the low rates for a longer term and there is increasing speculation that they could revise their assessment of the economic recovery into a milder version.
