Archived IMT (2011.02.01)

Commodities remain led by energy prices as last weeks Egypt-oil premium turns to the growth premium, courtesy of fresh multi-year highs in global PMIs. The rise in bond yields is tempering metals rebounds. Reports of Hosni Mubaraks fleeing Egypt remain unsubstantiated but the increasingly people-friendly Egyptian military is helping to restore confidence in global markets as hope re-emerges regarding the establishment of electoral reform ahead of the September presidential elections.

The Egypt and PMIs tests have come and gone and markets have passed them with flying colours. Unless the People's Bank of China upsets markets with a pre-New Year interest rate hike this week, the remaining obstacle would be the US January hobs report. Wednesday's release of the Jan ADP is expected to show a slowdown to 147K from 297K. A weaker than expected figure may slow the current-run up, but the key obstacle remains Friday's job report. BROAD USD WEAKNESS drags USD index to 77, close to the 3-year trendline support of 76.50. A close below 76.00 this week would signify a possibility towards $1.40 in EURUSD and 1.6280-330 in GBPUSD. AUDUSD gains +140 pips for the second straight day to hit a fresh 4-week high at 1.0084. Having broken the Jan 19 high of 1.0070, focus shifts to 1.00 will materialize. A clear break above it could extend towards 1.0180 Nov high.