Financial markets climbed higher after Fed Chairman Ben Bernanke reiterated his dovish stance on the central bank’s stance. Wall Street gained with the DJIA and the S&P 500 indices rising +1.11% and +1.36% respectively. In the commodity sector, crude oil initially soared but was held back by forecasts that growth in demand next year would be more than offset by growth in supply.
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Sentiment Higher as Bernanke Affirmed Easing Bias
The UK’s Sterling exchange rate saw a big boost higher in trading this morning against all world currencies after Q1 2013 forecasts suggest that UK GDP data would show that the British economy grew slightly in the first quarter, avoiding a triple dip recession.
Latest UK Sterling Rates
As of 10:17 GMT this morning, 1 pound Sterling GBP bought 1.18100 euros, or 0.69 percent higher and against the US dollar GBP bought $1.54350 or a massive 1.10 percent higher.
Avoiding a Triple Dip?
Given growing expectations that the UK has escaped a triple dip recession, analysts and traders said that UK Sterling was likely to see a more pronounced reaction if the data showed a fall in UK GDP.
“There’s been a bit of squaring of short sterling positions ahead of the GDP data. Everyone’s been a bit pessimistic about the UK recently and if the data is a bit stronger then we could get a knee jerk rally,” said Richard Wiltshire, chief FX broker at ETX Capital. And it seems that this may well be the case today.
However analysts also believe that the pound would still remain vulnerable to a more pronounced reaction if the economy is shown to have contracted, because the balance of expectations was that the UK would not slip back into recession.
“There’s a surprising confidence in the market that UK GDP will rise by 0.1 percent or better. Even if it is a flat reading I think sterling will take a battering and fall by at least a cent,” said Richard Driver, analyst at Caxton FX.
The Latest Data
According to the ONS (Office of National Statistics) the UK economy expanded 0.6 percent in the first quarter of 2013 from a year earlier, compared to expectations for a 0.3 percent increase. The UK economy expanded at an annualised rate of 0.2 percent in the preceding quarter. The ONS said the largest contribution to the increase came from the service sector, which grew by 0.6 percent in the first quarter of this year.
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UK Sterling exchange rate sees big boost higher on Q1 data forecast
Asian shares slipped after flash Chinese PMI weakened from a month ago. Overnight, US and European stocks strengthened further with Italian election lifted optimism. Wall Street gained with the DJIA and the S&P 500 rising +0.14% and +0.47% respectively. In the commodity sector, crude oil prices recovered with the front-month WTI contract adding +0.85% while the Brent crude contract gaining +0.74%.
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Asian Shares Dropped on Disappointing Chinese PMI
The price of gold took a spectacular nosedive lower today, seeing losses of nearly 10 percent with the price of an ounce nearing $1400 as panic selling had traders off loading from the precious metal.
Latest Gold Price
The price of gold fell to March 2011 levels with an ounce at $1416.00 for this afternoon, or 8.5 percent lower today. Gold prices fell by more than $30 in a matter of minutes at one point. Gold prices have now again fallen though a key technical support level and silver prices also doing the same thing.
Hedge Funds Short Selling
“We are entering a phase of additional long liquidation by ETF investors and short selling from hedge funds, which will continue in the foreseeable future,” Saxo Bank senior manager Ole Hansen said. Reading between the lines, this statement could really mean that bigger slumps this week are on the cards.
Gloom Spurs Selling?
On Friday, gold officially entered a bear market, falling below $1,500 an ounce for the first time in almost two years, as concerns that the US may cut short its stimulus program and news that Cyprus may sell a portion of its gold reserves to fund part of its bailout package spurred a massive selloff.
$1500 Was a Good Bottom Marker?
The level of “$1,500 seemed like a solid brick wall not too long ago and now gold has crashed right through it,” said Sun Yonggang, a macroeconomic strategist at Everbright Futures Co, China.
So what is going on here? Is it possible that gold is falling because banks are shorting it? Is it possible that the market is being manipulated?
I guess the best possibility would be that the situation in Europe has traders on sell mode again. European stocks are in retreat again today, possibily following ECB president Mario Draghi’s comments last Thursday that any economic recovery in the euro area remains subject to downside risks. This is propbably the real reason that gold has fallen on it’s sword today.
Anyone hoping for a quiet start to the week got a rude awakening as European markets dropped sharply on the open in the wake of disappointing Chinese economic data which showed that economic growth for the first quarter only came in at 7.7 percent. It’s going to be an interesting week…
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