httpvh://www.youtube.com/watch?v=E_brxMXXCpI

The dollar rose yesterday as uncertainty continued in markets as to how Ben Bernanke will speak on Friday from the Jackson Hole Wyoming conference. Cable fell into the 1.63s; levels not seen in the past week while EURUSD remained stable around the 1.44s. It is the belief that after a cracking durable goods orders release yesterday that the prospect of another round of quantitative easing has lessened in the past 24 hours or so. Regardless markets are still volatile as seen by the sharp equity rally in the afternoon session after the durable goods orders release plus the 4% fall in gold after the Chicago Mercantile Exchange hiked margins by 27%. This takes the increase in margins to bet on the movement of gold up by 50% over the course of 2012.

Durable Goods Orders jumped by 4% in the month of July; double what was expected. Most of this was as result of the transportation sector however core capital goods orders fell. While this is a good sign it stands against other manufacturing signals from the United States and does not change our belief that the US is set for a very rocky Q3.

Once again a business climate survey from the Eurozone has shown a marked deterioration in prospects. The German IFO fell to the lowest since June ’10 and the expectations index (views of future growth) fell to the lowest November ’08. The main falls were seen in the manufacturing, wholesale, services, retail and construction (so pretty much everything) but given the decline in manufacturing it shows that Germany too should expect a significant slowing soon.

Even so, the euro hammered the pound yesterday back into the 1.13s. We heard directly from traders that it was reserve managers (mainly from China and the Middle East) who were continuing to buy the euro in spades yesterday despite the data. The pound never really stood a chance. There was no real data reason behind the reason why the pound was picked on but it has regained some ground overnight after a stronger than expected consumer confidence survey according to the Nationwide Building Society.

We expect today to be quiet as traders hunker down for Bernanke’s missive tomorrow. Initial jobless claims may provide some volatility at 13.30 with expectations that 405,000 new people will have applied for jobless benefits in the United States in the past week.

Latest exchange rates at time of writing