Dollar Falls On ECB Rate Hike

U.S 10-year yields fell to a nearly 2-month low today, after a
private report showed a decline in service sector growth. Although the
report is not official, some traders took the numbers as further signs that the
Fed will end its rate hike cycle. The Fed has stated that more increases
might not be necessary to contain inflation, as the hikes have led to a cooling
in the economy. With the Fed meeting next week, investors are split nearly
down the middle on bets that the committee will raise rates.

The European Central Bank and Bank of England rose interest
rates today, and the euro and British pound both rallied strongly against the
dollar. The hikes reflect a tightening cycle in Europe that threatens to
take more money from the dollar. The Fed meeting next week has traders
guessing whether or not the U.S. government will raise rates. The ECB’s
President commented that more rate hikes are probable for October, which is a
bad sign for a dollar that is struggling to stay afloat with a cooling U.S.
economy. Japan is also expected to raise rates this summer, which is
adding further pressure to the downside on the dollar.

Crude oil futures and natural gas both fell today, as Tropical
Storm Chris looks to devolve into a depression, assuaging fears that the Gulf
would be hit hard by its first storm of the season. Crude oil fell 0.5% to
close at $75.46 a barrel and natural gas fell 6.5% after a run-up yesterday.
Fighting in the Middle East, hurricanes and rebels in Nigeria are all
threatening crude supplies for the U.S. and the world, helping to steadily drive
price higher over the last year.

The metals fell across the board today. Gold fell 1%,
silver fell 1.2% and aluminum fell 1%. The situation in the Middle East
continues to fester, but the demand for safe-haven futures fell on a growing
European economy and a dying Tropical Storm in the Gulf of Mexico.

The softs traded mixed today with moderate gains and losses.
Cocoa rose 2.4%, coffee rose 2%, orange juice fell 2.5% and sugar fell 1.7%.

Grains traded lower across the board today. Corn was
down 0.9%, wheat was down 1.5%, soy was down 1% and oats were down 1.3%.

Meats traded mixed, with cattle up 0.6% and pot bellied pigs
down 2%.


Economic
News

Factory Orders Growth Falls Short Of Estimates (full
story
).

Growth In The Service Sector Slows In July (full
story
).

ECB Lifts Rates By 25 Basis Points, Trichet Sounds Mildly
Hawkish (full
story
).

John Patrick Lee