Trends Rule: Bonds Up, Dollar Down
U.S. 10-year Treasury bonds pushed higher today, propelled by no major
news. Bonds traded higher for most of the summer, before falling in
anticipation of last month’s rate cut. Since the cut, bonds have struggled to
gain footing, but have hovered near recent yearly highs. Bonds typically rise
on economic weakness and fall on strength, so it’s clear that most traders
have taken up a defensive position relative to bonds.
The euro surged versus the dollar and the yen today, and the yen fell across
the board on the carry trade dynamic. After some strong numbers out of members
of the E-13, the euro jumped higher on speculation that hot European growth
could lead to a rate hike sometime this year. Dollar weakness has been a major
factor over the past few months, and the U.S. currency looks to keep moving
lower. The dollar was flat on the yen. The action today surrounded euro strength
and yen weakness.
Crude oil futures rose about 1% today. Crude prices have been mostly
consolidating over the past few weeks, after a massive run-up to new record
highs, reaching a record of $83.75 a barrel. Currently, crude is trading just
above 80, which traders consider to be a crucial psychological watermark.
Natural gas rose about 2% on more speculations about the coming winter months.
Gold futures were up moderately, about 0.3%. Gold futures rose on dollar
weakness versus the euro. Gold normally trades inversely to the dollar and
with oil, which is exactly what happened today. Traders bought gold to protect
against a weakening dollar and rising oil prices. Gold is also trading near
recent highs. Copper futures rose about 2% today on strong global demand.
Grains were up across the board today. Corn rose about 1%, while soybeans
gained about 1.7%.