Macro Morning: Golden crumble

Early strength in European stocks and the euro gave way in US trade overnight and gold is breaking lower once again.

Interesting last 24 hours in markets with the S&P hit 1525 for the first time since 2007 but reversed to sit lower at present. Euro was stronger initially after comments from the Russian Finance Minister which supported the G7 comments yesterday but it lost ground and gold is settling at its lowest close since August last year.

The G7 statement from yesterday is also still reverberating around markets. Indeed the statement by the Russian Deputy Finance Minister that  “there are no signs” Japan’s monetary authorities were intervening was a green light to sell yen once again but more cautiously than has been the case recently.

We can expect more confusing statements this week with the G20 meeting but as e noted yesterday the chance for a coherent response or words that address the current currency wars will be lacking. Indeed as James MackIntosh wrote in the FT yesterday  the real currency war that matters is the one that is getting the least amount of attention and which we mentioned yesterday which is the value of the Chinese yuan and the petro-dollar block.

He wrote,

The global imbalances in consumption and investment this creates is the currency war which really matters – and which the world is doing far too little to address.

I never had much sympathy when Greenspan effectively blamed the trade surplus nations and the recycling of their surpluses into Western financial assets for the GFC but to an extent he was right. Imagine if the yuan was 5, 4 or 3 it would be a very different world.

But back to overnight news and we saw that the retail sales in the US were up 0.1% as expected, Eurozone wide industrial production was up 0.7% which was much stronger than expected but it left the year on year rate still down 2.4%. But it is clearly a surprisingly good result.

Initially this data and the Russian comments gave the euro a bid tone and it rallied to a high of 1.3460 before pulling back a little to sit at 1.3443 down 0.07% on the day. The range was fairly tight at less than 50 points and perhaps this is what we have ahead of us over the next couple of days.

On the stock markets the State of the Union speech by President Obama gave the US market a bid tone early along with retail sales data but as the day proceeded that evaporated and the S&P after making a high of 1525 now sits down 2 points at 1517 with 45 minutes to go before the close. The Dow is off 0.45% or 63 points but the Nasdaq is up 0.08%.

s&p 500, spx, s&p 500 chart

The technical resistance in the S&P 500 is evident in the chart above and this trend line remains a constraint on further gains for the moment.

In Europe it was a better night after the industrial production numbers and they largely missed the reversal in the US with the FTSE up 0.33%, the DAX up 0.68% and the CAC up 0.34%. Milan and Madrid were also stronger rising 0.41% and 0.87% respectively.

On commodity markets I continue to watch the gold price as it remains in a multi-month down trend. Gold is down 0.45% at $1641 and looks biased lower as you can see in the chart below. Silver was off 0.48% roughly in line with gold’s fall for a change.

gold, gold price quote, xau, xauusd, gold daily chart

Elsewhere Nymex crude fell 0.51% even though the EIA stocks data rose only a quarter of what was expected. The Ags were quiet and OJ was up another 1.29%.

Lets have a look at some Meta 4 charts from my  AVATrade platform.

GBP/USD: 

I have been on this weakening GBP story for a while now and at 1.5535 it is at its lowest since last August and almost 150 points off the high of the day. No wonder that Mervyn King supports letting domestic monetary policy run its course and take its impact on  the exchange rate, as he reiterated in a speech at the economic club overnight:

gbp, gbpusd, gbpusd price quote, gbp chart

AUD/USD:

The 1 hour chart below the Aussie is stalling below a little trend line that goes back to the highs around Australia Day and comes in today at 1.0365. Without any decent data out in Australia today a catalyst for a break might be lacking however and the last 24 hour range is likely to contain the next 24 hours range as well:

aud, audusd, australian dollar, australian dollar price quote, audusd 1 hour chart

Data

Chinese New Year holiday’s.

German GDP and related Eurozone and other European nation GDP figures tonight are going to be the huge number for the next 24 hours along with the usual release of Jobless claims in the US..

Twitter: Greg McKenna

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