GBR Market Wrap: The Budget Ceiling is Closing In

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In this Week’s Issue: July 15, 2011

Weekly Snapshot

• U.S. consumer prices decreased 0.2% in June on a seasonally adjusted basis (BLS)
• S&P says there is 50% chance it will cut the U.S. AAA rating within three months (WSJ)
• Euro area annual inflation was 2.7% in June, unchanged compared to May (Eurostat)
• Moody’s said it was placing U.S. debt on review for a potential downgrade (WSJ)
• Italy approved austerity budget worth nearly €48 billion on Thursday (AP)
• The Swiss Franc reached another record high against the Dollar at 0.8080 (eSignal)
• Spot gold extended its record highs and hit a fresh record of $1,594.16 (Reuters)
• Ben Bernanke: Fed is ready to ease monetary policy if the economy flags (Reuters)
• PIMCO, the world’s largest bond fund, scales back bets against U.S. Treasuries (FT)
• Saudi Arabia increased its oil production in June to 9.7m barrels a day (IEA)
• China’s GDP expanded 9.5% in the 2nd quarter from the same period a year ago (WSJ)
• Bank of Japan kept monetary policy on hold and upgrades view on the economy (Reuters)
• The U.S. trade deficit in May increased 15.1% to $50.2 billion (ESA)

Market Barometers

Stock Market 2011-07-15

FX-2011-07-15

Weekly Chart

In the midst of the current U.S. debt ceiling debate, Ben Bernanke’s comments about the possibility of another round of quantitative easing (QE3) gave a clear market signal. Bond prices shot up again bringing the yield on the 10-year T-note safely below 3% this week.  Meanwhile, the price of Gold shot up to yet another all-time record finishing the week just a tad below $1,600.  The gold rally clearly isn’t over yet and the debate about the next realistic target has been revised upward to $2,000 (to most traders, the $1,600 level is just a matter of time, perhaps only days away).  The more relevant question though, what happens next?  Will the markets cool down before $2,000 is reached or is nirvana in sight for those who claim to see gold prices of up to $5,000 an ounce?

Gold-Monthly

Recommended Read
Please consider School Daze, School Daze Good Old Golden Rule Days, another excellent piece by the bond-Guru Mr. Bill Gross. Very timely considering the current budget ceiling debate and the increase of tuition fees at many universities, particularly in California.

Recommended Video
Please consider “Why Italy?”, a discussion between John Authors and Vincent Boland about a possible contagion of the Greek crisis to Italy and other European countries by clicking on the image below. Notable comments: Time to say to the banks:  tough luck, time to take your “hair-cut.”

Click on the image to play in a new window

Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.Disclaimer

Neither the information nor any opinion contained in this communication constitutes a solicitation or offer by us to buy or to sell any securities, futures, options or other financial instruments or to provide any investment advice or service. Each decision by you to do any investment transactions and each decision whether a particular investment is appropriate or proper for you is an independent decision to be taken by you. In no event should the content of this communication be construed as an express or an implied promise, guarantee or implication by or from us that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Please note that there is no requirement and no commitment to make any payments to FX Investment Strategies LLC in order to access our published information be it via email or via website publication. All information is publicly available without any required monetary consideration.  Any payments or donations made by you are deemed to be voluntary and cannot be considered as payments for investment advice given to you.

Author of the article
Clemens Kownatzki, MBA
Clemens Kownatzki, MBA
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