Merkel decides Greek fate at EU summit

German Chancellor Merkel defended the trust placed in the hands of the national government by the German people today by ensuring that the government of Greece has to seek financial aid from the IMF and not its European partners alone. Proving today that a friend in need is a pest, Ms. Merkel called for a tougher set of rules in the future to punish those who dared engage in “trickery” concerning their budgetary stance. She called upon the EU to stand hand-in-hand with the IMF in providing last-minute financial aid. The euro is coming off a midweek depression not seen in 10-months – perhaps on profit-taking, yet investors holding a large amount of short positions don’t seem to be in a particular rush to clear the decks.

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Euro – The euro reached a low Wednesday at $1.3284 before reaching $1.3371 in Thursday morning trading. It also rallied sharply against the Japanese yen to stand at ¥122.89.

Merkel’s denial of stand-alone assistance to Greece is as a result of its failure to abide by European treaties and national law. The impact of this failure is to dilute the value of the single European currency. By accepting the erosion of the euro now, Ms.  Merkel is donning a hair-shirt as a self-punishment for the collective failure to administer the regard for those treaties and laws. But by doing so today, she might ensure that the risk of a further failure in the future is minimized by forcing the observation of both treaty and law by larger members, to the longer-term wellbeing of the euro.

U.S. Dollar – The dollar is lower today, but having won several Olympic gold medals with yesterday’s performance, its slip today is understandable. Nothing goes up in a straight line forever. Data on Thursday showed ongoing improvement in the U.S. labor market with a 14,000 decline in the initial claims data to 442,000 for the lowest reading since December 2008. Continuing claims, while revised higher for the previous week, also showed a 54,000 decline.

British pound – There was little in the pre-election budget to startle traders yesterday although the pound did find its feet following a rather strong reading of retail sales data for February. The numbers showed a 2.1% monthly increase to boost the annual sales gain to 3.5% despite a revision to January data showing a bigger slide in spending than previously thought. In conjunction with recent positive trends in labor market data the British economy is shown under a better light these days. The pound rose to buy $1.4928 against the dollar and advanced to a one-month high against the single currency at 89.40 pence.

The Chancellor yesterday refused to make any cuts to public spending while forecasting that the public deficit would decline from £167 billion this year to £89 billion by 2014.

Canadian dollar – The speech presented by Bank of Canada Mark Carney midweek crystallized the conditional pledge that delivers Canada its low interest rate. He acknowledged that since the central bank’s last review in January that both inflation and growth had surprised to the upside, which leaves a threat to the profile for inflation. It’s looking increasingly likely that the Bank will be the first G7 nation to raise interest rates by the end of June. The Canadian dollar added almost one penny from a midweek low at 97.25 U.S. cents to reach 98.20 cents this morning.

Japanese yen –The yen fought back after a massive rally by the dollar on Wednesday when it reached an intraday peak of ¥92.40. This morning the yen rallied to ¥91.78 before the dollar was further inspired by jobless claims data sending it back to ¥92.18.

Aussie dollar – The Assistant Governor at Australia’s Reserve Bank noted once again that the domestic economy was still benefitting from a below average rate of interest given the above average pace of growth, which officials predict will be maintained for several years ahead. Having reached a low midweek of 90.66 U.S. cents the Aussie rebounded to 91.33 cents Thursday.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

Canadian dollar in purgatory

A jump in the core inflation rate in Canada has dealers left wondering how much longer the Bank of Canada will be able to maintain its conditional commitment to a near-zero interest rate policy. February data rose above the 2% target and leaves the central bank floundering against a January prediction that not only would the first quarter core rate average 1.6%, but also that inflation wouldn’t disturb the central rate until the third quarter. Growing expectations surrounding the economy and the relative monetary response compared to United States has had investors plundering the so-called loonie lately driving its value back towards parity. The response today was another surge in the local dollar.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

Canadian dollar –The Canadian dollar has acted like a pressure cooker lately with an increasing number of factors turning up the heat. Its primary appeal stems from the fact that as a resource-rich nation the fundamental demand for base, semi and precious metals works its way through the currency. Global recovery also reflates demand for crude oil and natural gas. In recognizing both Canada’s strong growth and global recovery, central banks and overseas governments have stepped up the allocation of Canada’s dollar within reserves. The fact that Canadian fiscal policy is likely to return a balanced fiscal stance within five years is a huge positive when the rest of the world’s advanced nations are suffering under the stresses and strains of ballooning deficits for as long as the eye can see.

While the core CPI data for January had risen to 2% it was widely expected to ease back to 1.7% in February. However, this morning’s data showed a further acceleration to an annualized pace of 2.1%. The news catapulted the loonie from a low of 98.15 U.S. cents ahead of the data to 99.05 cents as speculation swirled that the Bank of Canada might yet have to deliver a surprise return to normalization in light of positive economic data. In January the Bank of Canada predicted a first quarter average core CPI reading of 1.6%. To achieve this would require a 0.7% reading for March, which would be practically impossible save for downward revisions to previous data in a month’s time.

The pressure is now on the Bank of Canada to delicately explain that fantastic economic conditions have materially changed the inflationary trajectory and that to ignore it would risk having to act more than would be required if it could shake off its commitment through June. It could always shake off any interest rate increase on the unexpectedly successful political and fiscal measures speedily enacted after the global crisis.

The final thought to ponder is the likelihood of implicit monetary tightening in the event they try to string the party out through June. There is likely to be intense speculation at each meeting to that point with speculators betting via the currency that the Bank will be forced to act. Any disappointment will be hard to contain because the later the central bank leaves tightening, the more they will have to do, which would only enhance the appeal of a currency in purgatory. And by the way, that’s not near Calgary.

Euro – The euro is one again suffering at the hands of European discord to end the week. With the Greek Prime Minister threatening to take his woes to the IMF for financial aid, divisions within the EU are becoming blatant. French President Sarkozy and ECB President Trichet have already said that the path to the IMF should be ruled out on account that it shows the EU can’t solve its domestic challenges. Meanwhile German Chancellor Merkel predicts that this path maybe the only viable one for the government of Greece. From the perspective of the investor, events continue to be frustratingly opaque. Repeated meetings result in no clear statement other than a commitment that now appears far less solid than before.

Thus Greek PM Papandreou is holding a gun to whichever head he can by threatening to scoot off to the IMF if next week’s (24-25^th March) meeting of ministers fails to deliver an explicit financial aid package for his nation. The problem facing the euro right now is that Mr. Papandreou could very well be pointing the gun in his own direction in the event that the EU fails. That could be very tricky for the EU and thus the euro’s weakness continues in to the weekend where the unit has once again slumped towards $1.3550 – its lowest since early last week.

U.S. Dollar – Although it did no material damage to equity prices on Thursday, the rumor doing the rounds that the Fed was ready to make a second adjustment to its symbolic discount rate has traders on edge at present. We do not know the source of the story but can only say that the Fed is unlikely to pause in lifting that rate gradually until the spread between it and the fed funds rate has widened satisfactorily. Typically that could be a 1% spread, in which case there are two further moves whose timing is pure speculation, but before the summer would make sense and probably cause no harm. And while this isn’t a factor for driving the dollar higher since it genuinely does not signal and change to official policy settings, it does serve to highlight the deviant paths for monetary settings between domestic and Japanese policy.

British pound – The pound fell following words from a British policymaker that may be taken somewhat out of context. The headline story is the CNBC interview with the MPC member Andrew Sentance, who highlighted the potential facing Britain for a double-dip recession. On the face of it this is pretty bearish and created repentant bulls out of those eager to buy the pound earlier in the week after a positive jobs report.

However, Mr. Sentance did warn that this is not the Bank of England’s central view and that the risk to a secondary downturn for the economy comes from an external shock. This part of the story seems to have been overlooked today. One understands the weak domestic situation facing the British economy, but equally we know that fog is lifting. To fear further would be foolhardy on the simple basis that an external shock might happen. It makes more sense in light of recent data to maintain some optimism on the pound rather than to wear a hair-shirt and go about beating one’s chest in the worry that external factors become derailed. The pound eased against the dollar to $1.5146 and lost some ground to the euro at 89.44 pence. 

Japanese yen – The yen is falling against the dollar at ¥90.59 on Friday as investors keep one eye on rallying Asian stock markets and try to consider the role of the yen as a risk aversion vehicle. In a world of growing confidence and one where central bankers are discussing the need to unhitch their wagons from emergency monetary levels, one just cannot envisage a time ahead when the same can be said of the Japanese economy.

Aussie dollar –The Aussie dollar is finding the going a little harder in the environment where investors are jittery over potential Chinese action to stem growth. A headline-grabber earlier this week concerned the ban on bank lending to speculators in the land and real estate markets. The story is open to interpretation but the potential for further official Chinese measures that would stall growth is enough for now to curb enthusiasm for the Aussie currency, which today eased to 91.93 U.S. cents.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

Time to regroup

Wednesday’s forex activity was notable for two things: The dollar weakened as risk appetite accelerated sending riskier asset classes and currencies to multi-month peaks. The euro failed to join the party closing down on the day. It should, like a strong derby favorite, have taken up the early running, but we all quickly noticed how hobbled it looked resting at the back of the pack. Sure enough we find today that the questions are starting to arise about the very existence of a financial rescue package for Greece in the event it can’t roll over spring bond maturities over the next two months. Overnight developments leave us with the mental imagery of politicians in Berlin holding up traffic signs emblazoned with the words, “U-turn here for IMF building.”

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

Euro – We have become accustomed to hearing little substantive in the aftermath of EU ministerial meetings at which defense plans were supposedly discussed. Any press conferences or statements have been confined to merely stating facts surrounding the need for Greece to get its own house in order coupled with strong supportive words from fellow nations. However, the words yesterday from Germany’s chief finance minister telling Greece to pay a visit to the IMF if it feels the need for financial assistance is a real deviation from the previous script. It also leaves Chancellor Merkel treading a fine line between standing behind Greece and actual facing up to the nation as an opponent.

Needless to say the outcome is a reversion to ongoing fears for the euro, which slipped to around $1.3650 before rebounding to $1.3685. Headway for the single currency has suddenly become difficult to envisage. However, it has to be remembered that in the aftermath of the recent budget there was not only adequate but also ample demand for the €5 billion government bonds issued by Greece. The gradient of the uphill task facing the nation going forward evened out somewhat in the aftermath. Looking forward, IMF assistance is an option for Greece and looking beyond that the outlook might even improve. Arguably EU members won’t be dragged down by lending to Greece and may make a test case in sending the nation cap in hand to the IMF. For its part Greece is shored up by binding loans from the IMF, which could improve its credit-worthiness to future bond buyers.

For today, however, the perceived aversion to the euro was stepped up by investors as they sold it in favor of dollars, the pound and the yen.

U.S. Dollar – This morning’s dollar rebound on risk aversion fears continues to gather steam mid-morning while equity prices are contradicting the lack of risk appetite by putting in another positive performance. Weakness in the euro is the main reason behind today’s gyrations while in the big scheme of things, the dollar is currently confined to a narrow range.

British pound – Aside from a rebound in the dollar to $1.5307 the pound is holding onto recent gains. A midweek employment report showing far fewer job claimants seems to be the tonic sterling needed, while a smaller hole in the public finances was revealed today, which further boosted sentiment towards the pound.

Japanese yen – The yen is rising alongside the dollar after an overnight story carried by the Chinese Securities Journal reportedly stated that the Peoples Bank of China banned banks from lending to unscrupulous developers who hoarded land and withheld apartments from sales in the hope that land and property prices would rise further. This story has gained traction with speculation growing that China is set to take further measures to cool its economy. The yen strengthened earlier per dollar reaching ¥89.75 before slipping to ¥90.35. Against the euro the yen appreciated to ¥123.60 from ¥124.00. Against the Australian dollar the yen rose marginally to ¥83.29.

Aussie dollar – The China story once again served to tarnish the shining Aussie dollar, which is weaker at 92.18 U.S. cents. In midweek trading the Aussie surged to 92.52 U.S. cents, while Thursday’s forewarnings of measures to slow Chinese growth have tempered the bullish export scenario.

Canadian dollar –The Canadian dollar took a further step towards parity reaching 99.30 U.S. cents in midweek trade. The currency has attracted plenty of interest as measures by the government might ensure that it’s the fastest nation to eradicate a budget deficit with its plan to do so by 2015. Signs of stronger growth and rising inflation might also spur the Bank of Canada into faster action on the monetary front causing an additional appeal from a yield perspective. But it also appears that government ministers are far more sanguine surrounding the impact of an appreciation in the Canadian dollar. Just seven months ago they raised their fists to speculators warning that currency appreciation was dashing the recovery and that it would take necessary measures to reverse the move. And while they never lived up to those promises, political leaders have recently stated that the impact on a shrinking manufacturing sector is lessening over time. Additionally, ministers are now predicting that gains in productivity would outpace the appreciation of the loonie whose strength was showing little sign of impacting the nation’s competitiveness.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

Downward momentum is gaining as Crude has lost 2.9% in the last 2 sessions. We are expecting this move to drag prices in May to $76/77. As we voiced in our commentary this morning exit ALL longs in distillates until this correction runs its course which should pressure heating oil and RBOB 15-20 cents. Natural gas is still searching for a bottom but we like buying at these levels. We advised new entries to scale into May futures and we still like 50 cent call spreads for June thinking a trade back above $5 will play out in the next 3-5 weeks.

We’ve been fooled before as most followers know but the indices are looking heavy. We’ve yet to redeploy money short futures on a position trade but if the Fed meeting leads to selling we will most likely get short once again with clients. Some clients still hold their June ES and SP puts and are down but we are confident that these positions will be profitable. Sugar was off by just over 1% but we are operating under the influence that the lows last week will hold. The intra-day sell off in OJ was nice but not enough to get us interested in longs. We feel May needs to trade closer to $1.30 to buy a buyer for clients. We expect cotton prices to trade lower but we suggest waiting for a close below the 20 day MA at 80.35 in May for confirmation.

We suggest waiting for more upside in Treasuries to be a seller…maybe the Fed will aid in that. We advised clients to add to their July call options and long s in December futures in corn today. May soybean oil lost an additional 2% today; clients will look to exit tomorrow or the next day on a move closer to 38.00.  We suggest waiting for an interim top before jumping in front of the freight train we call live cattle; prices made new highs again today. Gold and silver were marginally higher but “Doctor Copper” was off almost 2%. On a settlement below $3.29 (today’s low) look for an additional 10-15 cents. Monitor the action in the dollar to help trading the other currencies. The line in the sand is the trend line at 80.00 on the June contract.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial.  Past performance is no guarantee of future trading results.

Markets seem to waiting for some type of catalyst to determine the direction of the next leg.

Inside day in Crude oil as prices hover around $82/barrel. For new entries we still like the idea of $5 put spreads but we would start looking at the June as opposed to May contract. If currently in the May we would try to buy back the bottom leg; we have suggested for clients to buy back their $70 puts and that would leave them long the $75 puts.

A disappointing day for longs in natural gas as yesterday could prove to be just a head fake. Clients remain long via April futures and June call spreads as prices were off 2.4% today.

As of this post indices are at the high of the day; we think we are close to an inflection point but we’ve been wrong for the past 2 weeks. If the S&P closes above 1148 exit short futures at a loss.

Fourth consecutive down day in sugar but we are assuming yesterday’s low at 18.82 in May will serve as support. May cotton has lost 3.8% in the last 5 session and closed below the 20 day moving average for the first time since February 8th. We are expecting another 2-4 cents and will then be advising clients to lift shorts.

Corn was flat on the day while wheat was a small loser and soybeans giving up almost 3%. A larger crop from South America could pressure soybeans another 30-50 cents.

Clients are long July soybean meal and down but we are looking for prices to rebound within that time frame, we may average in next week. Additionally they own puts in May soybean oil and should be able to book a profit next week on a move under 39.00 in May. Trail stops down if you are short lean hogs; if the 9 day MA gives way we should see a trade under 70.00 cents in April.

Mixed bag in metals; we are still anticipating a trade lower in gold, silver, and copper before we see any substantial upside.

The Commodity currencies (Kiwi, Aussie, Loonie) look vulnerable; clients remain short the Loonie expecting a trade under .9500.

A year after the weakest close for global equity prices, risk appetite has very much returned to the agenda. Stock prices are 60% or so higher from the bottoms reached in March 2009. Of course at the time no one knew it was the bottom and subsequently investors have climbed that so-called “wall of worry.” As they did they became accustomed to intermittent bouts of risk aversion, which often showed up in two forms. Type A would see stock prices around the world cascade lower as new systemic threats and corporate failures emerged. Type B risk aversion showed up in strengthening values for the dollar and the yen as investors sought safe haven sanctuary. But is it possible that we are now entering a new era? A clearly advancing global stock market, merely punctuated by intermittent and largely minor setbacks, is driving a wedge between risk aversion types A and B. That’s clearly evident in Wednesday’s trading as the dollar advances at the expense of the Japanese currency.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

U.S. Dollar – Earlier gains for the dollar are under pressure at 8am in New York except versus the yen. Earlier European news (see below) gave traders rationale to sucker-punch both the pound and the euro, but both appear to be regaining their poise. The reason for yen weakness stems largely from the fact that Chinese export data for February saw a huge 46% surge over the previous year and confirms two things. The Chinese currency is undervalued and global demand is alive and kicking. In light of this data the Japanese yen slipped against all of its major trading partners as investors lose the argument that there is an ongoing need to maintain a stake in safe haven units.

Chicago Fed President Charles Evans gave further encouragement to investors hoping for low interest rates for a long time when he said that the Fed would likely maintain its present stance for “at least three or four meetings.” With the FOMC scheduled to meet this month and next and then in Jun and August, the earliest possible shift in the fed funds rate doesn’t come until at least September. Those words from Mr. Evans are taking some of the shine off the appeal of the dollar today. He also noted that a low interest rate policy was consistent with a stubbornly high unemployment rate currently running at 9.7% and inflation well below the central target rate. Comments from its New York markets chief on Monday also confirmed that a pre-requisite for tighter policy would be a more established recovery.

Euro – The euro was earlier hurt by pessimism stemming from surprising weakness in German export orders for January. The trade surplus was expected to be €14.5 billion but thanks to a 6.3% contraction in exports that surplus shrank to stand at €8 billion. Overseas orders were supposed to rise by 0.5%. Meanwhile low inflation remained intact although marginally higher than was forecast. Data released today showed that annualized consumer prices rose 0.6% compared to a forecast of 0.4%.

The euro slipped earlier in the day to $1.3544 before rallying not long ago to $1.3625. Against the yen the euro buys ¥123.10 and a euro buys 91.13 pence.

British pound – The pound closed at $1.50 on Tuesday and found itself under further pressure today after manufacturing data showed the first drop in five months. The pound immediately slipped upon the release of the data to reach $1.4873 before recovering to $1.4933. Data showed unexpected weakness with industrial production falling by 0.4% on the month and manufacturing output on the decline by 0.9%. Both readings were expected to improve but the lack of export demand across continental Europe, also evident within today’s German data, proved a data-shocker for the U.K.

Japanese yen – Lack of a need for safety is the theme for the yen today. At ¥90.47 per dollar the yen is near the week’s low and we wonder what type of acceleration might occur on a push above ¥90.68. When the dollar typically spikes, it tends to emanate from a movement against the yen. Data overnight show that machinery orders slipped in line with expectations by 3.7% for January and confirm a lack of commitment to advance capital spending possibly created by the prospect that capital goods’ prices will be weaker ahead.

Aussie dollar – Recently the Governor at the Reserve Bank noted that Australians were still feeling the benefit of below average borrowing costs. In a speech today its assistant Governor Philip Lowe predicted that the economy would likely face several years ahead of above average growth. In tandem with surging Chinese export data indicating strengthening regional recovery the comments helped raise the appeal of the Australian dollar once again lifting it to a seven week high at 91.70 U.S. cents. In the bigger picture the Aussie also jumped to its strongest level against the pound since 1985 and against the euro in 13 years. While data showed that consumer confidence nudged higher official banking figures indicated a surprise drop in home loan approvals.

Canadian dollar –For eight consecutive sessions, intraday data shows higher highs for the Canadian dollar. Failure to breach 97.70 today will mark the first sign that the Canadian strength is in need of a rest. The loonie is currently lower on the day at 97.37 U.S. cents.

Andrew Wilkinson

Senior Market Analyst                                                               ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Andrew Wilkinson

Director of Media Communications

Interactive Brokers Group LLC

8 Greenwich Office Park, Greenwich, CT 06831

(203) 618 8085

Ready, willing and able

Monday March 8, 2010

French President Sarkozy’s strong weekend words supportive of the plight of Greece have seemingly struck a chord with investors across a variety of asset classes today. It would appear that last week’s efforts by the authorities in Greece have received a positive global response leaving traders ready to once again step back up to the table to feast on bolder prospects as appetite for risk returns.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

Euro – Monsieur Sarkozy’s comments gave investors the strong impression that EU partner aid in the form of financial assistance was very much available now that a stringent budget has been implemented. That the collective EU governments have given such a strong seal of approval for the Greek measures bolsters Sarkozy’s stance that the bloc is ready, willing and able to come to the financial rescue of Greece. The determined aspect of those words is in the short term at least having as supportive impact on the euro and risk in general.

The potential for independent sovereign default on behalf of the government of Greece appears that much more remote beyond a budget that has allowed for the creation of demand for high-yielding government debt. And the ongoing ratification of the path its government is treading helps make the short posturing surrounding the euro that much more tenuous. Latest CFTC data through March 2 shows that short euro positioning by speculators took a 7% haircut. Outstanding short positions slipped to 66,770 as the euro steadied.

There is little on the data front today other than a small decline in French business sentiment, which slipped from an index reading of 104 to 102 for March. In neighboring Germany the data could have been worse for industrial production during January. A 0.6% gain fell short of an expected 1% gain, but a serious backward revision for the better left the year-over-year data with a 2.2% gain.

U.S. Dollar – A broad rise in risk appetite for Asian stocks inspired by Sarkozy’s comments has helped push the euro to $1.3662 this morning, while the dollar and yen are suffering as investors appear to be breathing that little bit easier.

Emerging market stocks have built on last week’s 4.2% rally and are fast approaching breakeven for the year. The fact that Greek debt woes are receding has helped investors buy into the Asian recovery story more to start the week. In addition, bankers close to counterparties in the Dubai World saga have hinted that the conglomerate with outstanding debt of $26 billion is preparing to submit plans to creditors that may see them receive all of their loans back. According to media reports, creditors’ best option may be patience and a willingness to remain longer term lenders might assure them a guarantee from the government of Dubai.

The “safer” world this week is setting off a domino-style resumption of risk taking. The yen and the dollar are both falling as appetite for riskier bets in the shape of natural resources, emerging stock markets and riskier currencies picks up.

Japanese yen – The yen fell against the euro but is stable at ¥90.30 against the dollar. The better tone to the euro saw it rise to ¥123.32. March is the end of the Japanese fiscal year and is typically marked by a flood of overseas earnings returning to head office. Typically this supports the Japanese unit. However, investors are having a hard time making the argument that such demand for the yen can last beyond month end given the growing differences in the shapes of recovery between the world’s two largest economies. It’s becoming easier to argue that the Fed will shift policy higher before the Bank of Japan despite warnings from former and current Fed officials that now is not the time to remove either fiscal or monetary stimulus. Last week Japan’s Nikkei newspaper ran with a story that the Bank of Japan is set to mull new initiatives to stimulate its moribund economy. This will likely see a reversion to further Bank purchases of government debt in an effort to revive corporate and retail demand for loans.

British pound – Weekend opinion polls saw a widening of the lead for the opposition Conservative party ahead of a summer election. This, along with a wider appetite for riskier currencies aided sterling, which rose to $1.5196 and its highest point versus the dollar since the end of February. The euro rose a little to buy 90.23 pence.

Aussie dollar – This week brings the February employment report for the Australian economy. The booming domestic jobs market is expected to add a further 15,000 positions after an increase of 57,000 in January. Demand for the Aussie was once again fuelled by demand for natural resources in the shape of equities in associated companies or in physical buying of commodities. The Aussie rose to a six-week peak at 91.31 U.S. cents.

Canadian dollar – Throughout the recent Eurozone crisis the Canadian dollar fared far better than its Australian counterpart. As firmer economic data continues to emerge, investors are growing increasingly skeptical that the central bank will be able to maintain its near-zero policy beyond the date it promised in June. Each swoon in the euro that was exaggerated by losses in emerging stocks and commodity prices was felt less and less so by the Canadian unit, which has quietly accelerated towards parity with the U.S. dollar. Today the Canadian dollar buys 97.38 U.S. cents.

Andrew Wilkinson

Senior Market Analyst

ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

That is not to say ALL commodities will correct but examining the technicals and digging deeper into the fundamentals we expect a “healthy” correction in a number of commodities. Those that have already come off the damage may have already been done (sugar, natural gas, cocoa, agriculture) but others look ripe for a correction. Where we see the chances of the largest potential corrections are Oil, metals, cotton, OJ, live stock and the Indices.

Oil has been overbought for 2 weeks now but still prices have managed to gain $4 within that time frame. Clients are positioned in $5 put spreads and currently under water. We will not trade futures from either side until we get a clearer picture.

Still trying to pick a bottom in natural gas thinking there is not much more downside.Being clients only hold a small position we’ve been able to weather the assault the last 2/3 weeks.

Seven consecutive days in the stock market is very impressive but I’m a non-believer. I expect the January highs to act as stiff resistance; if prices get thru those levels unfortunately clients will be forced to cut losses on futures, regardless we will advise them to stay with their June ES and SP puts.

Sugar was down by 2.6% but the 200 day MA is still serving as a magnet and as long as prices do not wander too far from that level we will hold onto May and July put options for clients. Without a bullish surprise in Wednesdays USDA report we think cotton needs to correct 5-8% immediately.

Agriculture could be choppy in the next few sessions as traders position ahead of the USDA report. We will hold small longs in soybean meal, and corn and shorts in soybean oil into the report for clients. We cut losses in April live cattle futures for clients today as prices made new highs aided by fund buying. Our logic is the funds are in control and they have much deeper pockets than my clients so we will re-enter once a top looks like it is in place. We think it is very close but we are not willing to lose any more money. Aggressive traders could be short lean hogs with stops above last week’s highs.

April gold was lower by just over 1% today but did remain above key moving averages.Clients own NO gold as we feel a trade under $1100 is likely this week. We have yet to determine an entry point for longs…stay tuned. Inside day in May silver as prices were lower by .80%. We think a trade down to $16.50 an ounce is likely within the next week. We will likely be a buyer for clients if we got that move so stay tuned here as well.

We have little new to report in forex as the only open position for clients is shorts in the Loonie looking for a trade under .9500 in the March contract.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial.  Past performance is no guarantee of future trading results.

MB Wealth Corp. is not responsible and does not endorse anything outside of the content of this article authored by Matthew Bradbard; President of MB Wealth

Currency traders may ignore stormy labor data

Friday March 5, 2010

Ahead of the U.S. employment report the dollar is stable. Dealers will be looking at the headline number, expected to be job losses for February of around 50,000, and deciding whether bad weather distortions nullify the data. The dollar may react positively in the meantime due to a risk-aversion bid. On the other hand, a good reading would promote the view that the U.S. economy is chugging along slowly causing some more dollar bulls to challenge a none-month low in the euro.

Click on link for updated table throughout the day at http://www.interactivebrokers.com/en/general/education/FX-View.php?ib_entity=llc

Euro – However,  the fact that the euro has held up against a $1.3432 low against the dollar depressed by uncertainty surrounding the Greek fiscal flare up, could mean that investors have already caused maximum euro destruction in which case there are lots and lots of short positions with no choice but to buy to close out positions. And we all know what happens when the exit hatch gets crowded.

This week’s Greek budget has served to thaw the government’s access to the capital markets enabling it to find ample bids for €5 billion in 10-year bonds on Thursday. Admittedly the price was rich at 3% more than the comparable cost to the German government, but the fact that there times the number of buyers showed up to buy Greek bonds underscores the improvement in market sentiment in the aftermath of its austerity package.

Following the ECB’s press conference on Thursday in which it announced a six month extension to abundant money market liquidity provision, the euro slipped as dealers quickly concluded that the odds in favor of a U.S. rate hike faster than at the ECB were improving. The euro slipped to $1.3550 from close to $1.3700 and today is steady at $1.3581.

U.S. Dollar – The dollar is moving higher against the low yielding yen and Swiss franc. All eyes will be on Friday morning labor data and we’ll be looking for any encouragement beyond the impact of persistent snow storms to see if or not the broader trend towards recovery is alive.

Overnight in China the Premmier Wen Jiabao delivered comments that inspired regional stock market gains. He promised to maintain an appropriately easy monetary policy and a pro-active fiscal policy. The provision of bundles of liquidity in order to buoy the economy when domestic external demand plunged left the economy was surplus cash, which fed into real estate and stocks. The Peoples Bank of China has to wrestle with over zealous lending provision by curbing loan activity while the government has moved to create an offsetting tax regime. The news pushed investors towards riskier trades and spurred appetite for the Australian dollar.

Aussie dollar – The  Aussie has risen off a low at 89.78 U.S. cents yesterday when the U.S. dollar jumped and ahead of the U.S. labor data peaked at 90.40 cents.

Canadian dollar – The Canadian dollar has largely escaped losses at the hands of the recent appeal of the greenback. Instead the Canadian unit has been largely capped by a range of 96.75 to 97.25 U.S. cents. Ahead of the data the Canadian unit is right in the middle of this range.  

British pound – The prospect of a slow recovery and the domination of a nervous election battle is keeping sterling hemmed in a narrow range just above $1.50 before today’s data. Against the euro the pound is slightly higher at 90.75 pence.

Japanese yen – The yen is lower today after sources said the Bank of Japan, under growing pressure from the government, will discuss further initiatives to ease already low monetary policy. It’s hard to know precisely what they can do to stave off deflation at this point and although the current measures adopted to use quantitative easing to pump more funds into the system, the success is clearly limited. Trying to further reduce monetary policy is akin to trying to make an already thin piece of paper even flatter. The success of the Japanese central bank will be found in its ability to perform origami with that paper and design something captivating. The yen eased per dollar to ¥89.34 and lost ground to the euro at ¥121.35 while it dropped per pound to ¥134.35.

Andrew Wilkinson

Senior Market Analyst

ibanalyst@interactivebrokers.com

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

This phrase is coined for the college basketball tournament but I think it is an accurate description of what to expect as a trader this month. At its highs today oil was less than $3/barrel from making new highs on the year. Being bearish for the last 1-2 weeks has made our clients NO $ but we still feel a trade to $75/76 is imminent. We are not disputing a trade in summer is likely up to $90 but first a correction. We still favor $5 put spreads.

Natural gas should finish down 3.5-4.0% lower on the week. That is not too bad! Clients have a small long position in April futures and June call spreads and at the moment are all under water. We expect the next 2 weeks to be better to us in energies; that means crude down and natural gas up.

Are you kidding me that we only lost 36,000 jobs and unemployment did not change? The equity market is being propped up by the powers that be and if the free market determined prices we would be at least 10% lower. Clients are down on their June ES puts but will stay the course being they have over 3 months time.

Sugar closed up 2.4%; we suggest being long May and July via options looking for a move back to 26 cents. For the first time in 4 weeks cotton will finish lower; clients are positioned to take advantage of a set back to 75/76 cents in May.

Treasuries were hit hard today and we do think more downside is likely in the coming months but we still feel one will get the opportunity to put on shorts from higher levels. If the recovery is underway which I question and there is more talk of the Fed raising rates traders should re-visit the idea of short Euro-dollars. The charts look like in the next few sessions

Agriculture will trade lower. Aggressive traders could use that to get short while I would prefer getting long from lower levels. USDA report out next Wednesday. Our current positions for clients in Ag include long corn, long soybean meal and short soybean oil.

We have no positions in lean hogs with clients but it appears a double top could be forming around 74 in the April contract; that level acted as stiff resistance in mid-January as well. Live cattle finished about 1 penny higher on the week; clients remain short expecting a trade back near 89 cents in April.

We caution any exposure in gold as we could see a $50 move either way. If lower we would suggest buying the dip. May silver closed at the 100 day moving average today about 15 cents off its highs. We like being long but would prefer to open fresh longs on a set back to $16.50. If we do see a retracement that holds we would think the next leg up would lift prices to near $18.50 mid-summer.

Clients were advised to take profits on their Yen shorts today as prices have peeled off 3 cents in the last 2 sessions. We advised those still interested in currencies to get short the Loonie. We are looking for a move in the Loonie back under 95 cents. We are operating under the influence that stiff resistance comes in at .9750/.9800.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial.  Past performance is no guarantee of future trading results.

Matthew Bradbard
MB Wealth Corp.
(954) 929-9898
(954) 929-9993 fax
matt@mbwealth.com
www.MBwealth.com

Please do not place any trade orders via email as they will not be executed.

Trading in commodity futures and options involves substantial risk of loss. Past performance is not indicative of future results.