httpvh://www.youtube.com/watch?v=9-iMW1HYlOg

So we start the second half of the year and with it became a new market behaviour, one diametrically opposite to what has been the norm over the past 18 months.

In recent times of stress the investment community’s equivalent of a massive bar of chocolate and a bottle of chablis have been the US dollar and gold; something safe to fall back on. Yesterday both, despite stock market falls and horrific data from the US, had one of their worst days in a long time. The dollar index fell by 1.5% as investors ditched low paying US treasuries whilst gold moved below $1200 as speculators moderated their inflation outlook.

Data from the US raised fears that we will see a slowdown in US growth in the coming months. Manufacturing data suggested that factories are seeing still seeing expansion but at a slower rate than in the first half of the year; something to be expected the longer a recovery goes on. This was compounded by housing data that showed that the end of a tax break for new house purchases had slowed demand by 30% in the past month while unemployment figures showed an unexpected increase in the amount of people claiming jobless benefits.

With the strange dollar movements and the general volatility environment high we saw some interesting price action yesterday. GBPUSD rose to a high of 1.5198, the highest since May 4^th while EURUSD managed to get above the 1.25 level.

It is of course Non-Farm Payroll Friday today; a day that poses serious risks to even the most savvy of traders. The spread of views as to how the number will print range from no jobs lost to 250,000 with the consensus around 130,000 newly unemployed. Given the dollar moves yesterday we are reticent to predict exactly what will happen with dollar crosses over the coming 24hrs although our belief is that we will see some USD strength today. Markets will remain volatile throughout the afternoon as well as the Netherlands vs Brazil game will see liquidity slip.

Have a great weekend.