The Bear Strikes Back!
A 6.7% increase in Crude Oil (following the detainment of British Soldiers in Iran), and FED Chairman Bernake’s comments that “uncertainties have risen” pulled down global markets this week.
Although positive news continues to come out of Asia and Europe (notably Germany), the US continues to disappoint. A decrease in consumer confidence on Wednesday coupled with Thursday’s Personal Consumption and GDP figures and The FED’s inflation concerns saw the dollar soar, but markets falter. Economists have argued that Asian growth could fill the void created by the US slowdown, but with many of these “export centered” countries so heavily reliant on the US consumer this is unlikely until sufficient internal demand is created.
Currency trading again centered on the Yen that is again being borrowed to finance Carry Trades. Interestingly, currency traders took considerable interest in the Icelandic Central Bank’s rate decision this week and a probable decrease in interest rates (from 14.25%) resulted in large scale options trading to protect against this. The Icelandic Krona is the world’s second best performing currency against the dollar this year.
As previously mentioned, the fate of the 15 British sailors held captive in Iran will dictate crude prices going forward. Sly Iranian diplomacy has placed the UK in the unenviable position of having to admit “entering Iranian waters” to secure their citizen’s immediate release. We hope for sense to prevail and will be monitoring the situation closely.
As we reach the end of the first quarter, speculation exists that prices have been pushed to artificially high levels for reporting purposes and the above mentioned geopolitical factors compound the prevailing uncertainty.
Kind Regards,
The Global Trader Team
AI
