Oil hits a New Record

Gold fell back from previous highs, but still managed to get within $5 of the magical $1,000 level at one point. Gold is up 18% since the beginning of the year, and since bottoming out in 2001 oil has now risen over 530%. There were also record highs for the Euro, before this too retraced from its highs of the week.

The sell off on Friday was caused not by all time highs, but by the worst US jobs data for five years. Initially shares attempted a recovery as rumours of emergency rate cuts did the rounds. According to analysts, the jobs data solidifies the prospect of 0.75 base point cut at the next FOMC meeting. However, this wasn’t enough to lift the gloom and the weak rally soon turned into a rout.

Tremors from the mortgage sector continued to worry traders, as US mortgage foreclosures reached all time highs, and mortgage hedge fund Carlyle Group failed to meet a margin call. Not only is this global credit crunch far from over, there are signs that the crisis is directly impacting the wider economy. The Bank Of England’s weapon of choice in such circumstances is to cut interest rates, but their hands are currently tied because of soaring commodity prices. To make matters worse, the impact of a rate cut may have little effect on consumers, as the cost of lending remains stubbornly high.

Following the black Monday crash in 1987, markets effectively traded in a range for 8 months. Even though shares recovered, it took two years for the Dow Jones to regain the previous highs. Given the recent slew of poor economic data, the bulls could think themselves lucky if a range trading environment is the picture for the coming months. The benchmark S&P 500 index is now within 23 points of its January lows, if these hold the bulls will be breathing a huge sigh of relief.

Next week is thankfully lighter on the economic data front, but there is still enough to keep traders busy. Notable data to be released next are UK Industrial production and PPI figures on Monday, US trade balance on Tuesday, US core retail sales on Thursday, the Swiss interest rate decision also on Thursday, and Finally Core CPI and Consumer sentiment on Friday.

With little headline data from Europe next week and a 0.75 base point cut already starting to be priced into the Dollar, further upside on the EUR/ USD could be limited next week. A No Touch trade predicting that the EUR/ USD won’t touch 1.5750 over the next 7 days could return 10% with BetOnMarkets.

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