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Forex outlook:
Sterling rose to its highest in 15 years against the yen yesterday, as investor appetite for risk retained interest in the higher-yielding British currency. Broad dollar weakness after softer-than-expected U.S. inflation data last Friday also gave sterling the upper hand against the greenback. The yen stayed on the backfoot across the board, hitting a record low against the euro as expectations for Japanese rates to rise only gradually from 0.5 percent remained intact, giving the green light to continued carry trades where investors use low-yielding currencies to fund purchases of high return assets.
"When risk appetite is fairly buoyant, people like holding the carry trade," RBS currency strategist Paul Robson said. The pound was up 0.3 percent on the day against the dollar at $1.9814, while the euro was down 0.1 percent at 67.63 pence. On the data front, property website Rightmove released figures on Monday showing that asking prices for homes in England and Wales picked up modestly from mid-May to mid-June but property inflation held below peaks scaled earlier this year. Rightmove said prices rose an annual 13.2 percent during the month. This compares with the previous month's 13.1 percent rise and four-year highs of 15 percent in late March/early April. Analysts said however that the housing numbers did not play into sterling's moves significantly on Monday as investors were focusing more on minutes from the Bank of England's latest policy meeting -- due out later this week.
Economists polled by Reuters expect that seven of the BoE's nine-strong Monetary Policy Committee voted to hold rates at 5.5 percent earlier this month, with two voting for a hike. Analysts say any sterling gains from a more hawkish outcome to the minutes would be limited, as markets are already pricing in further BoE hikes. "It's hard to see how people could get any more hawkish, given that we already have two more rate hikes priced in this year," RBS's Robson added.
Gold: Gold prices rose to their highest in more than a week on Monday as recent declines attracted physical buyers and bargain hunters. Spot gold hit a session high of $659.05 a troy ounce, it’s highest since June 8."Given the potential for further dollar weakness, oil price strength and a tense geopolitical environment, gold prices should resume their upward trend in the medium term," Barclays Capital said in a note. The dollar weakened against most major currencies on Monday. "Also crude oil as the second main driver is probably further well bid on supply concerns and would be another support for gold," Dresdner Kleinwort said in a daily report. Gold is generally seen as a hedge against oil-led inflation and often moves in the opposite direction to the dollar. The metal has risen 2.5 percent since falling to a three-month low of $642.90 last Wednesday due to bargain-hunting and buying by jewellery makers at lower levels. Speculators cut their net long positions, or bullish bets, on U.S. gold by 30 percent in the week to June 12 as the precious metal's benchmark futures contract on New York's COMEX market hit a three-month low, trade data showed on Friday.
Crude Oil: U.S. crude oil futures rose on Monday, bouncing off early lows to post nine-month highs and end above $69 on fresh concerns about interrupted supply or the threat of interruption in Nigeria and an oil workers' strike threat in Brazil. The session peak was the highest price for front-month crude futures since $69.59 was reached on Sept. 5. The July contract expires on Wednesday. "Potential Brazilian and Nigerian strikes, the attack on the Nigerian flow station," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc., commenting on the bounce by crude futures above $69. Nigerian unions will start an indefinite general strike on Wednesday to protest against rising prices and privatization, the two umbrella union bodies said on Monday. Products futures helped boost the oil futures complex last week after the inventory report from the U.S. Energy Information Administration showed gasoline stocks flat at 201.5 million barrels in the week to June 8. The EIA will release another batch of weekly data on Wednesday at 14:30 GMT.
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