Crude oil retreats in spite of equities' strength in Asian and European sessions. Although crude oil inventory fell last week, both gasoline and distillate stockpiles continued to climb higher. Possibility of economic slowdowns in the US and China has shaken confidence of oil demand. Currently trading as 81.9, the front-month WTI crude oil contract has retreated more than -1% from a 3-month high of 82.97 made yesterday. Price broke above the upper end of recent trading range of 70-80 on August 2.

Natural gas remains firm after rising +2.11% yesterday. Gas price rallied above 5, the first time since June 22, on August 2 but then plunged to 4.632 the next day. Price has been trading with high volatility amid a tug of war between ample production and increased demand due to higher-than-normal temperature in the US. The market anticipates gas inventories rose +30bcf in the week ended July 30, compared while 5-year average increase for the week is +47 bcf.

Gold bulls take a breather after yesterday's rally on China's deregulation of gold market. While the central bank has pledged to liberalize the market, there're no details on the timing and the plan. Upside momentum because of this event should fade if investors do not see further actions from the government in coming few weeks. Yet, the yellow metal will continue to be supported as long as speculations on Fed's resumption of QE remain. Not only will the hyperinflation fear of the liquidity-pumping program boost gold buying, USD's weakness (USD's recent decline accelerated after St Louis Fed Chairman Bullard's comments that the Fed should resume bond buying) will increase demand for dollar-denominated assets. Note that recent correlation between gold and USD (or EURUSD) has returned to 'normal', i.e. gold and EURUSD has shown positive correlation again.

Economic data released today has been mixed. In New Zealand, unemployment rate surprisingly rose to 6.8%, compared with consensus of 6.2%, in 2Q10 from 6% a quarter ago as employment contracted to -0.3% on quarterly basis. The RBNZ raised the OCR to 3% last week but the central bank will likely pause in the next meeting as growth over the past few months have shown signs of slowdown. Indeed, the RBNZ mentioned in the post-meeting statement last week that 'the pace and extent of further OCR increases is likely to be more moderate than was projected in the June statement'.

Germany's factory orders expanded +3.1% m/m in June after dropping -0.5% a month ago. The market has anticipated a modest growth of +1.5%. This, together with strong confidence data released recently, signaled Eurozone's growth has gathered momentum.

As expected, the BOE today voted to maintain the official Bank Rate at 0.5%. Meanwhile, the asset buying program remains unchanged at 200b pound. The minutes will be released on August 13 while the quarterly inflation report will be published on August 11.