U.S. Equities & Commodities

Today has seen conflicting data out of the U.S., but after some back and forth movement, the equity markets are rallying as we cross into the second half of the U.S. session. Traders initially celebrated the much better than anticipated Intial Jobless Claims which came out at 466k and broke what had become a psychologically important level at 500k. The improved employment outlook seemed to be enough to outweigh the poor Durable Goods data which disappointed heavily; however markets soon began to dwell on the weak figure and trended lower. Fortunately for the bulls, New Home Sales also showed improvement (actual 430k vs. 405k forecast) and stocks moved into positive territory. Across in the commodities pits, gold, crude oil, wheat and corn are all rallying. Gold broke to new highs on speculation on falling supply and a weaker Dollar; crude oil retested support around $75.50, but has since rallied to $77 on the back of weaker than expected inventory data. Wheat and corn are both up more than 3%.

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FX

EURUSD has broken to a new 2009 high at 1.5094 as the ECB is said to be discussing a change in its twelve-month loans to banks. Currently, the ECB has made unlimited funds available at 1%, but it seems the idea of making this rate adjustable to demand is being discussed by council members. The market is interpreting this as a hawkish sign. USDJPY is tracking lower after dropping below 88.00 this morning and has recorded a day low at 87.38 - a level not seen since January. Analysts are interpreting the latest drop for USDJPY as a reaction to yesterday's FOMC minutes. The dollar is becoming the preferred carry trade currency over the Yen as the Fed displayed little willingness to combat USD weakness.

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