By Chuck Butler

01/07/11 St. Louis, Missouri – The dollar is rallying again today, and quite frankly, right now, the institutional momentum is so strong, that there’s nothing that would stop this rally…today that is. It’s a Jobs Jamboree Friday, the first of 12 for 2011, and as I said yesterday, I believe that the US will post the best monthly number for job creation in a couple of years today. I truly don’t believe that it’s something that can be maintained, given the fact that we’re talking about December, when shops bump up their employment to deal with the Christmas shopping season. But, it will be the Big Kahuna today, job creation that is, and for that, we need to analyze what this will do to the currencies, right?

First of all, the Bureau of Labor Statistics (BLS) will print job creation for November this morning. Right now, the “experts” believe that 150,000 new jobs will show to have been created in November. The unemployment rate, however, will only tick down 1/10th to 9.7%… Again, that’s the forecast by the “experts”. I think that if the actual, no wait there’s no such thing as “actual number” with the BLS, well, then what should I call it? OK… I think that if the trumped up number is anywhere close to the forecast, then the dollar will rally further… And even currencies like the Japanese yen (JPY), Swiss franc (CHF), and Chinese renminbi (CNY), who have found solace in any past dollar rallies, will be sold… Because, it’s going to be all about the dollar today…

The beleaguered and beaten down euro (EUR), is really feeling as though it’s getting sand kicked in its face again. Yesterday, the euro fell through the 1.3050 line of resistance, which according to the technical people, means the next stop for the euro is 1.2970… After that, we’ve got a quick fall to 1.28 and change, where the euro fell last winter, when Greece was a major contributor to the euro’s weakness. Remember, I’ve told you for years now, that the euro is the offset currency to the dollar… So, it makes sense that dollar strength will show up in euro weakness. Hey! You can’t say that I didn’t warn you that we could see euro weakness early in 2011… (Sorry, I have to put that in there, because there will be quite a few emails in my box telling me that I should have warned people about a weaker euro to start 2011, and this way, I cut that off at the pass!)

Did you hear what European Central Bank (ECB) President, Trichet said about the euro? He said that the euro was “a stable currency, as stable as its predecessors, including the Deutsche Mark.” WOW! I’m sure the Germans weren’t too happy to hear those words coming from a Frenchman… Besides that comment from Trichet, the only other thing going on in the Eurozone was the printing of third quarter GDP, which was bang on expectations of +0.3%… This is the GPD for all 16 countries… So, Germany’s third quarter GDP was quite strong…

The Canadian dollar/loonie (CAD) seems to be the only currency with any intestinal fortitude to stand up to the dollar’s rally this morning… The Swiss franc is holding on, but if you go back to last Thursday, the headline on the Pfennig was “Swiss francs and Copper reach all-time record highs”… And gold? OMG! The shiny metal has lost another $13 this morning! And silver is $3 lower than it was a week ago!

After the Jobs Jamboree this morning, I expect the dollar to be entrenched in rally mode, and then Fed Chairman, Big Ben Bernanke will give his testimony on the economy to lawmakers… I truly believe that Big Ben will toe the line and explain why the Fed needs to continue its QE2 program… For those of you who missed class yesterday, I said that the Fed had only bought $170 billion of the $600 billion total scheduled for this round of QE. For those of you keeping score at home… The total in the first round of QE was $1.75 trillion… Holy Money Printing, Batman! What will be the end result of these QE implementations? Well, Robin… It’s not going to be pretty… But at least the Fed has applied lipstick to the pig for now, and that’s all the media and markets care about, which is shameful… Shouldn’t the Big Picture be explained for fair and balanced reporting? You are so smart, Batman…

So… At the top I told you that even the Japanese yen was losing ground to the dollar. Well, there seems to be a rumor going that one of the major credit rating agencies may be about to downgrade Japan’s credit rating, because of their debt picture. Hmmm… I can tell you right here, right now, that the credit ratings agencies don’t have the intestinal fortitude to cut the US’s rating because of its debt picture… No way, no how… It ain’t gonna happen! Why? Because if there was news about a possible cut, the US would simply close down the rating agency… That’s my scenario; I have nothing to back that thought up… It’s just how I see it happening, and as always, I could be as wrong as two left shoes…

I would caution the markets from making too much of a credit rating cut for Japan… A currency dealer told me yesterday that 95% of Japanese Government Bonds (JGB’s) were in the hands of domestic investors… So the Japanese hold 95% of their country’s debt, and those domestic investors aren’t going to give two hoots about a credit rating cut.

Don’t you just love tidbits of info like that? Here you are, standing around at a cocktail party, and some guy says, “Hey! My inside information tells me that Japan is going to get a credit rating cut. That will sure knock the stuffing out of Japanese Government bonds.” And you can say… “Ahhh… Not so fast there, cowboy… My guy tells me that 95% of Japanese Government Bonds are held by domestic investors, which will mean the credit rating cut won’t mean a hill of beans to them”… And to think you get this cocktail information for free!

But… The rot on the Japanese yen’s vine could very well, finally be exposed…

The Norwegian krone (NOK) is beginning to rally against the dollar as I write this morning… A quick look at their data cupboard, and I see where Norwegian Retail Sales for November showed a nice rise of 1.8%, and Industrial Production printed with a rise of 0.9%… Both of these results were far greater than the expectations, so, that’s why the krone is feeling better about itself this morning, and mounting a mini-rally against the dollar.

A former colleague of mine, sent me a note last night, telling me that he had read a research report that called for investors to buy Singapore dollars (SGD) instead of Chinese renminbi… He asked me what I thought. I said… “That’s exactly what we’ve told investors for over a year now… That Sing dollars are a great proxy for renminbi.” I went further to say that I wish all our investors would opt for Sing dollars over renminbi, as long as renminbi remains a non-deliverable forward, which means it’s non-deliverable, and its liquidity is tight! You can wire Sing dollars anywhere you want… So, for those of you who missed this discussion that we had about a dozen times in 2010, there you go!

So… I told you yesterday of Brazil’s latest attempt to stem the real’s (BRL) rise… Well, now Chile has decided to do the same. Now, the Chilean peso (CLP) is an ill-liquid currency, and you would have to be an institution, or Monty Millionaire to find an institution to make a market in it for you. I find it interesting to talk about, given the Chilean pesos’ rise in 2010…and the fact that these developing markets have central banks that believe they can manipulate their currency, with limited resources.

The Aussie dollar (AUD), is really feeling the problems that the floods have caused, as exports are now threatened, and we, (Pfennig readers) all know that a major portion of Australia’s economy is derived from exporting those raw materials…

Well… That brings me to the Indian rupee (INR)… This marks two comments on rupees in the same week for me! WOW! Well, to follow up the discussion we had a couple of days ago regarding the rising inflation in India… I saw this… India’s annual food-price inflation jumped to 18.32% in the week ending Dec. 25, a development that experts said might lead the central bank to raise interest rates. This should underpin the rupee…

And then to follow up my discussion about worldwide food prices rising… Food and commodity prices are expected to rise worldwide because of flooding in Australia, an extremely cold winter in Russia and drought in Argentina… So get ready… stock up the pantry shelves…

Then there was this… The good folks over at the NIA (National Inflation Association) put out their forecasts for 2011, and it looks like they will be bang on with this one, considering the report yesterday, that showed the Holiday sales were not as robust as first thought… Here’s the NIA’s thought…

Although most analysts on Wall Street believe retailers will report a major increase in holiday season sales over a year ago, NIA believes any top line growth retailers report will come at the expense of dismal bottom line profits. NIA expects many retailers to report large declines in their profit margins for the 4Q of 2010 and first half of 2011. Retailers have been selling goods at bargain basement prices in order to generate demand. Americans, being flush with newly printed dollars from the Federal Reserve, have been eager to buy up supplies of goods at artificially low prices. However, shareholders will likely sell off their retail stocks on this news. As share prices of retail stocks decline, retailers will begin to rapidly increase their prices by mid-2011.

To recap… The dollar continues to swing the hammer, even against the Chinese renminbi, and Japanese yen, two former stalwarts versus the dollar, rain or shine… It’s a Jobs Jamboree Friday, which will show that job creation in December will have been the best in a couple of years… But is it December holiday employment only? We’ll have to wait for the January numbers to know… There are rumors this morning that a credit ratings agency is going to downgrade Japan’s credit rating because of their debt picture… Would this same credit ratings agency do the same in the US? And Chile is following Brazil into the currency manipulation ring.

Chuck Butler
for The Daily Reckoning

Read more: US Dollar Entrenched in Rally Mode http://dailyreckoning.com/us-dollar-entrenched-in-rally-mode/#ixzz1AOxufiVp

This is not entirely true but metals and energies certainly fit the bill. May Crude advanced again today briefly peaking its head above $85/barrel. If momentum gains and the dollar breaks down we could be looking at $90 in the coming weeks; no this is not an April fool’s joke. Crude oil has gained over 20% since the first week of February and it looks like the bulls remain firmly in control.

Bullish engulfing candle in natural gas on good volumes carries natural gas prices back over $4. As we’ve voiced we think the upward move could start on short covering and this may be the 1st inning. Wait for confirmation early next week. We will be looking to move on July options for clients if a bottom is confirmed.

Picking a top is a dangerous and sometimes expensive game as clients and readers know in the indices of late. On a disappointing jobs number tomorrow look to gain bearish exposure. Our favored play for clients remains June ES puts.

Impressive action in sugar today as a mid-day reversal puts prices back in the green, gaining over 2% today. According to some informed floor traders we spoke to there appears to be large buying in out of the money July and October sugar calls; we will potentially be moving next week in that direction…stay tuned.

Based on the close today we suggested taking off all shorts in cotton; depending on your entry/exit it should we a small loss or a small profit.

The weather over the weekend and if farmers in the Mid-west can get into their fields will set the tone on grains next week. We will be advising to exit May shorts once we feel a bottom has been established in corn. Fresh entries should be looking to buy December corn when a bottom is in which we feel is imminent. The KCBOT/CBOT wheat spread continues to move in the right direction; when KCBOT trades at a premium start looking for an exit door.

Aided by dollar weakness and positive fundamentals out of Europe and Asia metals traded to fresh highs. June gold finished at its highest level in 2 weeks back above the 100 day MA. Use $1115 as support with $1145 as resistance. May silver hit $18 for the first time since late January. We expected this and higher levels in 2010 but we anticipated a correction prior to. The only exposure clients have are July $2 call spreads so we welcome a move higher but we would prefer to see a probe lower to get exposure with futures. The most recent move from $16.50 to $18 in the last 2 weeks was certainly not expected from me. The June US dollar is below 81 closing just under the 20 day MA as it appears sellers are overpowering buyers.

Continue to trade European currencies inversely depending on your viewpoint as I am content on the sidelines until we get a clearer picture. The only constant remains weakness in the Yen; losing 3% in the last 8 days. Continue to sell rallies that are capped at 1.08.

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

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.

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

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

Though there is far more profit potential being short or long futures in oil at the moment we prefer sleeping at night and have advised clients to trade options until we get a clearer direction if they intend holding overnight. We are still thinking a set back of $4-6 is likely in the coming days/weeks and have not ruled out a trade back to $70/barrel. Could a 5% down move today be the capitulation low that natural gas needed to find a bottom?

Being prices are this close on the front month it is likely to challenge a trade below $4. Prices have not seen that handle in 7 months. Clients were advised to put in limit orders to buy back the top leg of their June call spreads today. It would take a slightly lower trade to get filled.

Sugar has put in 2 consecutive positive showings for the first time in 1 month. Lets try this again…as long as prices do not close below 18 cents on the May contract we like being long very lightly as we’ve been burned before. Assuming this low holds a trade back to 23 cents could happen quickly.

A safer play could be to trade spreads or options as opposed to futures. OJ traded a nickel lower intra-day but managed to close above a trend line that has held since last fall. We would like to see more downside and should if we can break the aforementioned trend line.

Clients exited their May soybean oil puts at a  loss of $90/per. Corn is back above the 20 day moving average and as we indicated yesterday we like being long. We are looking for a trade back to the previous resistance in the coming weeks to month; about 60 cents above today’s close. Live cattle a gainer by another 1.5% today to fresh highs; though it is tough hold off selling until we see signs of a top.

Gold and silver remained range bound again today with silver off a touch and gold inching higher. The dollar raced higher today taking all other crosses lower with the Euro getting hit the hardest. Roles have once again shifted and now the Euro and Pound are a sale on rallies as opposed to a buy on dips. Our lone currency play is short the Loonie; an interim top perhaps yesterday?

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

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

OVERVIEW OF THE MARKETS

The ongoing bull-market in global stocks is gathering steam and over the past few days, the momentum has shifted in favour of the West. Yesterday, the S&P500 Index closed at a 17-month high and we expect further gains over the following weeks. Over in Asia, our preferred markets are performing well, with India leading the way. Furthermore, it seems to us as though China and Vietnam are also about to commence another upleg within their primary uptrends. Given the fact that the Asian economies are in a much better shape than the West, we continue to believe that stocks in India, China and Vietnam will produce solid growth over the course of this business cycle. Therefore, we are holding on to our positions and believe that near-term weakness represents a buying opportunity.

As far as the technical picture goes, it is notable that the market’s breadth is extremely strong and the Advance/Decline line on the NYSE has broken out to a new high. Furthermore, the number of new highs is significantly greater than the number of new lows, the bank index has started outperforming the broad market, volatility has subsided and the yield curve is very steep. All these are positive signs and suggest that we are still in the early stages of the ongoing bull-market. Remember, interest-rates are very low in most nations and the monetary backdrop is supportive for asset prices. As long as the interest-rate environment is favourable, we will maintain our growth seeking investment positions.

Over in the commodities complex, the price of crude oil is trading above US$82 per barrel. This is in line with our expectation and as long as the economic recovery is intact, we should see more upside. Regardless of what you might hear in the mainstream media, hard data confirms that the world will struggle to produce more than 89 million barrels per day of crude oil and with demand rising in the developing world, the stage is set for a serious oil crunch. Our view remains that the price of crude will rise significantly and we have allocated roughly 35% of our clients’ capital to superb energy companies. Apart from upstream oil companies, we have stakes in world-class solar, wind and power companies. Moreover, we have recently acquired a stake in a railway company which should be a prime beneficiary in an era where trucks will prove to be big losers.

In the metals arena, base metals are holding steady and this is despite the big build up in inventories. In our view, this rally is mainly due to speculation via ‘long only’ commodity trackers and at some point, we will get a nasty correction. Accordingly, we have recently liquidated our positions in the base metals miners and have allocated capital elsewhere. With so many opportunities around, we do not see the point in making a speculative bet when the supply/demand fundamentals do not support base metals.

As far as precious metals are concerned, gold and silver are trying to build a base. It is worth noting that precious metals are in the seasonally strong time of the year and a spring rally is still possible. As George Soros stated in Davos, “with near-zero interest-rates, gold is the ultimate asset bubble”. We agree with his assessment and believe that monetary inflation together with the massive debt overhang in the West will propel gold and silver to new highs. Accordingly, we are holding on to our positions in our preferred gold and silver mining stocks.

In the world of money, the US Dollar Index is trading in a tight range and it is struggling to break above the 81 level. Furthermore, the Euro and the British Pound are now extremely oversold, so a sharp rally cannot be ruled out. Amongst the paper currencies of the developed world, we prefer the Canadian, Singaporean and Australian Dollars. And in the developing nations, we like the Indian Rupee and the Chinese Yuan.

The above ‘Weekly Update’ was sent out to subscribers of Money Matters on Friday, 12 March 2010.

Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets.  In addition to the monthly report, subscribers also receive “Weekly Updates” covering the recent market action. Money Matters is available by subscription from www.purusaxena.com.

Puru Saxena

Website – www.purusaxena.com

Puru Saxena is the founder of Puru Saxena Wealth Management, his Hong Kong based firm which manages investment portfolios for individuals and corporate clients.  He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs.

Copyright © 2005-2010 Puru Saxena Wealth Management.  All rights reserved.

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

You cannot have your cake and eat it too! Either circumstances in the economy are getting better and we need to start looking for an exit door or we are still in for a sh-t storm and then no action is necessary! If the Fed sees the economy improving than why leave IR at an “excessively low rate for an extended period.” Inflation subdued by what measures? Pass me what Ben and the gang are smoking. Crude gained by 2.5% today, ideally this is a one day wonder but tomorrow will tell. Talking to some big energy traders today they expect a range from $76-82. We will continue to play options for clients on rallies thinking that we will head back to the lower end of that range.

It sounds like a broken record but we like scaling into longs in Nat gas at these low extremes. What will be the catalyst one client asked today to turn around prices…I do not know but this the short trade feels too crowded!

Indices were sideways to up on most of the session and are still trying to digest the Feds non-action to decide where from here. I’ve thrown in the towel trying to predict a top but some of the cycle analysis that we’ve read of late courtesy of some of our clients predicts going into April it could get ugly.

Sugar made fresh lows, futures traders should have been stopped at a loss when we broke last weeks levels. We are holding off on all new entries until this market bottoms. On a rally if we get one in the coming weeks we will be looking to cut losses on call options for clients.

Let Treasuries rally 1 1/2-3 handles before selling! We will have an interest in 30-yr bonds closer to 120′00 and above 118′00 in 10-yr notes.

Green across the screen in agriculture today with corn up by 1.0%, and wheat and soybeans by 1.60%.Corn is a buy; in options we like July and futures December. We sill think there is a possibility to see a trade close to 38.00 in May soybean oil to exit for clients; we will give it till the end of this week.

Metals caught fire today likely because of the pressure on the dollar and strength in outside markets. April gold, May silver and May copper all gained virtually 2% each. We do not trust the upside and the only way we see it following through is we get a hefty break in the dollar…stay tuned.

That being said the dollar index broke the 2 previous days lows and the trend line that had held since the first week of December. The Euro and Pound should benefit the most as they have been hit the hardest. The Euro could make a stab at 1.3950/1.40 and the Pound at 1.5500; next significant resistance levels.

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

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.