This Week in Focus - Oil and Gold Up, Euro Down

Monday, June 20, 2005

This week will bring a comparatively modest number of US economic indicators (see table below).
Fed governor Mark Olsen will testify to the Senate's Committee on Banking, Housing and Urban Affairs on Tuesday and is scheduled to deliver the speech "The Ownership Society: Revisiting Traditional Paths to Ownership" on Thursday.
With the FOMC meeting on June 29/30 coming closer journalists will be up in arms trying to extract some hints on the further rate policy of the Fed. Most Fed members on record in the recent past have indicated that they want to stay with the policy of a 25 basis point hike.
Although the latest inflation figures showed the first decline since last December, the new spike in oil prices will keep the Fed on vigilant watch for any price pressure. Crude oil for July delivery rose to a morning-high of 59.16 dollars on reports that the US has closed its embassy in Nigeria on unspecific security concerns. Nigeria is the world's 11th largest oil producer.
The other geopolitical thermometer, gold, rose as well, adding 2.80 dollars and pushing through the next key level of 440 dollars. Bloomberg had a story, saying that gold rose on the expectation that European central banks would slow their gold sales. According to the ECB's weekly financial statements Euro zone central banks sold significantly more gold in the last three weeks, namely for 87; 141 and 161 million Euros after sales has languished around 30 million Euros before that. All these sales stand in contrast with the ECB's release from earlier this year, saying it's member would abstain from further sales until September, see this post. The gold and gold receivables reserves of the ECB have stayed stable in Euro terms this year despite the sales with an aggregated volume of 1.975 billion Euros. The ECB declined to comment the sales on requests from Bloomberg.
The Euro fell half a cent to 1.2232 dollars after the failure of EU officials to agree on a seven-year budget added to concern economic integration will slow. British prime minister Tony Blair will not attend a meeting of EU Social Democrat leaders in Vienna this week. Sources in my hometown say he wants to avoid getting his feathers ruffled.
Euro area share markets traded all slightly lower on the combination of sluggish growth outlook and mounting political problems with calls for an interest rate cut by the ECB from various European politicians getting louder. If there only weren't that problem of the double whammy of higher oil priced in a stronger dollar that limits the possibilities of the ECB dramatically.
Leading indicators May: consensus minus 0.3%, last minus 0.2%
Jobless claims: consensus 330,000, last 333,000
Existing home sales May: consensus 7.2 million, last 7.18 million
Durable goods orders May: consensus 2.0 %, last 1.9 %
New home sales May: consensus 1.32 million, last 1.316 million


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