Bonds Ease, Dollar Up on Data

U.S. 10-year Treasury bond prices fell today,
after a positive non-manufacturing ISM report and a decline in initial jobless
claims were released today. A surprisingly positive
non-manufacturing ISM report was released, which rose to 56, versus analyst
forecasts of 53. Bonds are down for the week at this point, driven lower by
positive manufacturing and durable goods orders. Bonds typically fall on
economic strength and rise on weakness, so traders have taken this week’s
economic reports from the U.S. as a positive sign for the economy.

The U.S. dollar jumped today against the euro and the yen, moving to
2-month highs against the Japanese currency and to a 1-week high against the
euro. Today, a surprisingly positive
non-manufacturing ISM report was released. The service industries index
rose to 56, versus analyst forecasts of 53. Today marks the 3rd straight day
of a dollar move against the euro; positive manufacturing and durable goods
orders reports from earlier in the week helped to kick-start this dollar
rally. The euro reached new highs against then yen, but fell back during the
day to close slightly lower. The euro also fell against the British pound, on
speculation that the BoE will raise rates next week.

Crude oil futures fell about 0.7% today, on
speculation that U.S. inventories can handle any unexpected spike in demand.
Refineries are just now beginning to re-open, and should supply the market
with extra gasoline supplies. Crude inventories right now are about 4.8%
higher than the 5-year average. Natural gas futures jumped nearly 3% as
traders bet that coming hot weather will boost the need for gas for electric

Gold futures rose fractionally today, as
traders bet that the dollar’s rally will not last. Gold usually traders
inversely to the dollar and with oil, and it was dollar speculation that drove
gold higher today. Traders bought gold to cover themselves from any imminent
dollar weakness. Copper futures rose about 1% on a continued rally from the
durable goods orders report that came earlier this week.

Grains traded mixed today. Wheat closed up
fractionally, corn rose nearly 2% and soybeans dropped about 0.2%.


non-manufacturing index rose to 56, versus expectations of 53.

Worker productivity in the U.S. rose 1.7%,
versus expectations of 0.7%.

John Lee

Associate Editor

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