Oil Falls Further, Gold Up on Euro Strength

U.S. 10-year Treasury bond prices fell back to
recent lows today, as traders prepared for tomorrow’s crucial jobs report.
Analysts are speculating that the report will show that job growth accelerated
last month; the jobs report will add a critical piece of data for traders to use
to predict the broad economic health of the U.S. Bonds typically rise on
weakness and fall on strength, so with bonds at 1-month lows, investors are
looking for strength and growth as 2007 rolls on.

The euro rose to 2-year highs against the dollar,
and pushed towards record highs against the yen, as traders speculated the the
next two years will be high-growth periods for Europe. A German industrial
report came in stronger than expected, and prompted euro buying. The
international currency market favors currencies backed by inflationary,
positive-growth economies, which Europe has proven itself to be. Both the
United States and Japan have struggled to consistently produce positive economic
numbers, and those failings are evidenced in dollar and yen weakness. The
yen has also been trading inversely to global equities, as the effects of the
carry trade play out.

Crude oil fell nearly 1%, after Iran released the
15 captive British sailors. Crude shot up and kept rising after Iran
captured 15 British sailors in the Persian Gulf. Traders feared that an
escalation of the situation could lead to Iran removing its oil supply from the
global market; similar fears helped to push oil to record highs last July.
Natural gas rose about 2% on cold weather in the Northern U.S.

Gold futures rose about 0.3% as the euro surged
against the dollar. Gold usually trades inversely to the dollar and with
oil, and it was dollar weakness against the euro that led to gold buying.

Grains traded mixed, but mostly higher today.
Soybeans were flat, corn rose nearly 2% and wheat rose over 3%.


No major economic
news to report for the U.S. today.

John Lee

Associate Editor