US dollar witnesses a sell-off; Sterling hits a three week low against euro

US Dollar

US dollar witnessed a sell off versus a basket of currencies on Wednesday as upbeat data from China and Australia revived uncertainty in global markets and gave a boost to risk sentiment. Australia's economy grew at the fastest pace in three years in the last quarter as households spent far more than expected while exports enjoyed an Asian-driven boom, reviving the risk of a further rise in interest rates and leading to a surge in the Aussie dollar. Other data showed Chinese manufacturing staged a moderate rebound in August, easing concerns about the pace of global growth that are based on weakness in the United States.

Sterling

Sterling hit a three-week low against the euro and cut gains against the dollar while gilt futures pared losses on Wednesday after a UK purchasing managers' survey came in sharply lower than expectations. The Markit/Chartered Institute of Purchasing and Supply Manufacturing PMI fell to 54.3 in August below the market forecasts from a downwardly revised 56.9 in July. That was the lowest level since November last year although it was still above the 50 mark which separates growth from contraction in activity.

Gold

Gold continued to trade firm, but is likely to decline as a rally to a two-month high prompts some investors to sell. Gold jumped 5.6 percent in August, the biggest monthly advance since April, as equities dropped on concern that the economic recovery is sputtering, boosting demand for the metal as a protection of wealth. The MSCI World Index of equities fell 3.9 percent in August. Bullion has risen 14 percent this year, reaching a record $1,265.30 on June 21.

Euro

Euro shrugged off the poor German retail sales and instead surged higher tracking the weakness in US$ index. German Retail Sales missed expectations printing at -0.3% versus 0.6% forecast as they contracted for the second month in row. The fall was largely due to a fall in food spending which fell 0.4% from a year earlier. Nonfood sales were up an impressive 1.9% in the same time frame. On a positive note however, the recent revision upward for the past six months worth of data suggests that today’s the initial reading may be too low and could be increased in the next adjustment period.

Oil

Oil rose to $72 per barrel on Wednesday after news that Chinese manufacturing growth accelerated last month, easing concerns over the pace of economic recovery. Prices tumbled 3.7 percent on Tuesday on signs that U.S. stockpiles rose further last week and bad weather was set to suppress gasoline demand at the end of the driving season. Appetite for raw materials was also depressed as the minutes of U.S. Federal Reserve's latest meeting showed policymakers saw increasing risks to growth. The American Petroleum Institute (API) reported yesterday that U.S. crude stockpiles jumped 4.8 million barrels last week, more than four times the expected gain of 1.1 million barrels.

The Energy Information Administration (EIA) will publish government statistics on inventories and demand on Wednesday at 6.30 PM Dubai time. Expectations are for gasoline supplies to have declined 200,000 barrels and distillates to have gained 1.2 million in the week to Aug. 27. Hurricanes, now at the peak of the storm season, could potentially have a bigger negative effect on U.S. gasoline consumption than on crude production. They have so far posed little threat to rigs and refineries in the Gulf of Mexico. Hurricane Earl, a Category 4 with maximum sustained winds of 135 mph (215 km/hour), headed towards North America's east coast and was expected to approach Pennsylvania and New Jersey, home to all the U.S. East Coast's operating refinery capacity of 1.136 million barrels per day. The U.S. National Hurricane Center said it was monitoring two other systems in the Atlantic, but computer models showed no immediate threat to Gulf of Mexico oil infrastructure.

Source: Richcomm Global, Dubai

Price Update

GOLD

1253.1

SILVER

19.43

EURO

1.2791

GBP

1.5395

YEN

83.77

RUPEE

46.805

AED / INR

12.743

AUD

0.9041

CHF

1.0097

CAD

1.06

OIL – (WTI-Aug'10)

72.28

Date

September 1, 2010

Time

4:19:57 PM