Todays forex Updates

• FX: EURUSD sustains below the 100 weekly SMA currently at 1.4208, but slowly starts to look soft with heavy bids around 1.4050. Carry trades well supported in Asia despite risk aversion in equities.



• Fixed Income: Bunds made a strong comeback yesterday, also supported by weak US home sales and flight to safety. Losing momentum in Asia though with JGB’s on debt issue speculation.



• Stocks: European session generally down 0.5-2.0%, looking to re-establish downturn trend. Ugly day in the US on Lehman worries. Indexes down 2-3.4%. Asia not taking that big a hit on bullish China numbers. Nikkei down 0.4%, Hang Seng 1.6%.



• Commodities: Metals lower with both gold & silver taking out key support levels, however, gold not managing a follow-through. Oil slightly higher in Asia.

• In a move that surprised the markets, OPEC has agreed to an output cut. The change would see the production effectively being curbed by half a million barrels a day. Before the decision, the oil prices had seen 5-month lows, or about 30% below the peak prices of this year. OPEC

had been expected to keep production levels unchanged but has instead taken on a more price defensive posture.



• In overnight trading, the Asian stocks have added to previous session’s losses as weak demand factors are now reinforced by sliding metals prices, hurting the large resource producers.



• As the stock price of Lehman Brothers continued to slide with no result from the talks it had held with Korea Development Bank, the firm has come under growing pressure to find a way out of its troubles. The markets will be keenly observing as the bank will be announcing its Q3 results before the US opening today, a week earlier than planned.

August is called the month of Oil Price fluctuation

I believe that market focus for the near future will be on the sterling and oil prices – two key elements in keeping the dollar stable. Oil prices fell the steepest fall in 4 years on last Friday to below $115, thus increasing the dollar's gains. The rise in oil prices is the U.S.-Russia conflict, as Russia is the second largest oil producer in the world. Canada is also one of the world's largest oil producers, providing the U.S. with the largest supply of oil.

Very recently the rise in gold and oil prices has brought the dollar's rally to a halt. On the other hand, the rise of oil to above $116 a barrel was not as helpful to the euro and the sterling as expected, reflecting the bearish sentiment towards these currencies.


On 13th August 2008, the Oil prices were down yet again by 1.3 % to $113.17 a barrel – a total $30 drop since July's record. The steep fall from $147 to below $115, was due to its status of a major exporter of oil.

On the contrary on 11h august, this price eventually settled at $116.50 a barrel. I believe on that day that the rise of the euro had hit a wall, and its fall is not only contributed to the pressures from soaring oil prices. The euro has lost momentum, affected by dollar buying as well as the tight monetary policy, making investors believe that a European cut in interest rates will occur sooner than later.

Thus august month has seen major changes in the prices of oil and its impact on world currencies.

GBP/USD – 2 year high for the dollar in sight of Britain's frail economy

Data on the UK's gross domestic product has revealed no changes in the second quarter at 0.2% quarterly growth, its lowest in 16 years. This rose investors' expectations that the Bank of England would cut interest rates. This as well as weak data from the European region gave support to the dollar.

Despite the weakening of global economies and the resulting boost of the dollar, traders remained skeptic about the continued rise of the dollar due to the frail U.S. financial system. Traders will be closely monitoring U.S. housing data to be released this week, as well as new developments about the future of Lehman Brothers investment bank and mortgage giants Fannie Mae and Freddie Mac.

I believe that market focus for the near future will be on the sterling and oil prices – two key elements in keeping the dollar stable. Oil prices fell the steepest fall in 4 years on Friday to below $115, thus increasing the dollar's gains. Moreover, Investors will act carefully at this week's housing data, which might limit the dollar's gains, yet they have no reason to sell the dollar for now.

The sterling fell to $1.8415, its lowest rate since 2006. This slide brought about unexpected short positions in the sterling, perhaps making it possible for the currency to recover.

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