Euro and Gold Slip

By John Lee

U.S. 10-year Treasury bond prices rose today, erasing some losses from yesterday's slide. A $5 billion auction of 30-year securities attracted a lower bid than was expected, but bond prices still rose through the day. Bonds typically fall on strength and rise on weakness; a number of U.S. retailers reported unexpected weakness in April sales, sparking growth fears in bond traders. Despite yesterday's somewhat hawkish Fed announcement, today's retail numbers reiterated concerns of slowing U.S. growth.

The dollar rose against the euro today, after the Fed reemphasized inflation worries in the FOMC announcement yesterday. Today, the ECB held rates, and traders took his commentary as dovish. The BoE raised rates today by 25 bpp to 5.5%. The euro did, however, rise against the yen during morning trading. Despite the dovish interpretation of ECB President Trichet's remarks, Trichet did say that "vigilance" would still be required, which has preceded each of the last rate hikes since 2005. Some traders are calling for a top in EUR/USD, on the heels of a soft announcement. The U.S. dollar gained against the yen early in the day on momentum from yesterday's announcement, but gave up gains as the day went on. The U.S. dollar also extended gains over the Canadian dollar, bouncing after a long period of loonie strength.

Crude oil futures rose about 0.4%, mostly on demand concerns for the summer. Summer is a period of high demand and usually, rising energy prices, so traders are speculating that this summer will be no different than normal, and prices will move higher. Gas has fallen off of recent highs near 70 to fall near crucial support at 60. Natural gas futures were basically flat today, after an energy report showed that inventories grew more than expected.

Gold futures fell about 2.3% today, as the dollar rose against the euro. Gold usually trades inversely to the dollar and with oil; today's gold action was dominated by dollar trading. Traders bought the dollar, which sent gold's worth as a hedge lower. Copper futures fell over 3% on signs of slowing demand from China.

Grains fell across the board. Soybeans dropped about 0.2%, wheat fell fractionally and corn plummeted over 3%.

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