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U.S. 10-year Treasury bond prices rose today, after a weak consumer spending report prompted fears that the economy is slowing. The Fed held rates at 5.25% yesterday, and maintained that inflation remains the central bank's primary concern. A weak inflationary report today led traders to buy bonds, on fears that slow inflation will lead to a rate cut. Bonds fell through May and into July, but bounced from extended lows on a number of unexpectedly soft inflationary reports.
The euro surged on the dollar and the yen today, as the yen continues to collapse on a widespread resumption of the carry trade. The yen has attempted to rally lately, but towards the end of the week, yen weakness carried through to bring the Japanese currency lower. The yen is currently trading at record lows against the euro. The dollar fell against the euro this morning and also fell fractionally against the yen. The dollar plummeted against the Canadian dollar, but rallied from extended lows.
Crude oil futures gained more than 1% today, and closed above the crucial $70 a barrel watermark. Crude rose this week after the Energy Department announced a significant decline in gasoline reserves, which pointed to slowing refinery manufacturing. Summer is typically a period of high demand and rising prices, so any type of decline in energy reserve usually leads to a jump in prices. Natural gas futures rose 1.3% as traders speculated that this year's hurricane season could damage supply lines.
Gold futures rose 0.5% as the euro advanced over the dollar. Gold usually moves inversely to the dollar and with oil; today's dollar action dominated gold trading, and the precious metal rose as traders hedged against dollar weakness. Copper futures rose 0.7% on limited supply concerns.
Grains all bounced today. Soybeans rose about 0.3%, wheat gained 0.25% and corn rose fractionally.
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John Lee
Associate Editor
johnl@tradingmarkets.com
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