CommStock Israel Investor Insights Newsletter
Monday, April 20th, 2009

1) Dollar rallies against euro

European Central Bank chief Trichet gave no details about his next monetary policy move in his speech Friday.

Last Updated: April 17, 2009: 4:59 PM ET

NEW YORK (Reuters) -- The U.S. dollar touched a one-month high against the euro Friday after comments from European Central Bank President Jean-Claude Trichet left investors uncertain about the bank's future policy path.

The dollar was also boosted by a slight rise in risk aversion despite a smaller-than-expected loss from Citigroup) as investors reassessed the sustainability of the recent spate of more upbeat results.

The ECB's Trichet, who is to unveil the bank's plans for unconventional policy steps next month, gave no details of these measures in a speech in Tokyo, saying he did not want to create expectations.

Concerns over a split in the ECB's governing council and uncertainty over the central bank's next move on interest rates and non-standard measures have weighed heavily on the euro in recent sessions.

"The market is getting increasingly disappointed with the ECB's policy stance," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

"Trichet failed to clarify the central bank's position on either rates or prospects for non-conventional easing measures," he added. "We could see some stand-alone euro weakness across the board."

In late afternoon trading, the euro fell 1.1% to $1.3039, still near the session low of $1.3019, according to Reuters data, its weakest since March 18, when the dollar fell sharply after the Federal Reserve announced its plan to buy government bonds.

Besides the Fed, central banks in Britain and Japan have started quantitative easing measures to fight the deepening recession around the world.

The dollar was little changed against the yen and last traded at ¥99.22.

"A little bit of risk aversion and euro weakness ... is boosting the dollar," said Paresh Upadhyaya, a portfolio manager at Putnam Investments in Boston.

Despite the better-than-expected results from Citigroup, "the market still remains skeptical about what this means going forward for the financial sector," he said.

Trichet, SNB eyed

Also hurting the euro were Trichet's comments in Tokyo, which analysts at Brown Brothers Harriman said were seen as "a possible warning" to ECB members who have recently expressed different views on the bank's next policy move on both rates and nonconventional measures.

In his speech, Trichet said: "Any ambiguity in our medium-term policy direction would delay the return of sustainable prosperity."

"The euro is the star underperformer (in recent sessions) ... because of question marks over the direction of monetary policy." Putnam's Upadhyaya said. "Markets have been questioning the ECB's stubbornness in easing monetary policy or (its) stubbornness to react in a pro-active manner."

Adding to pressure on the euro was a warning from ratings firm Moody's Investors Service that Ireland's 'AAA' rating may be cut to mid-to-high 'Aa' range if it concludes that the country will emerge from the crisis with relatively weak growth prospects and a much higher debt burden.

Against the yen, the euro dropped below 130 to trade down 1.3% at ¥129.25.

The Swiss franc fell sharply against the euro and dollar after Swiss National Bank Chairman Jean-Pierre Roth warned the central bank was ready to intervene should the Swiss franc strengthen.

The dollar last traded up 1.8% at 1.1670 francs after hitting a session peak of 1.1688 francs, according to Reuters data.

2) Commentary by David Zwebner, CEO of CommStock Trading

U.S. Economy
General Electric earned $2.74 billion in the first quarter, down from $4.3 billion a year ago, but better than expected. Citigroup lost $966 million in the first quarter, not as bad as expected.

The University of Michigan's index of consumer sentiment increased from 57.3 to 61.9 in April, the highest reading since September of 2008. The March eurodollars dropped .12 to 98.495, the lowest close in over a week.

Grains and Cotton
The Environmental Protection Agency is considering increasing the ethanol blend in gasoline from 10% to 15% and is now accepting public comments on the issue. Use the link in "Today's Top News Articles" to learn how to send in your comments.

The USDA said that 55,000 tons of U.S. soybeans were sold to unknown destinations this year and another 220,000 tons were sold for 2009-2010. July soybeans dropped 9 cents to $10.415.

The U.S. winter wheat crop is getting beneficial rain today, especially in Kansas. July wheat was down 1.75 cents at $5.347.

Expectations for good planting weather ahead knocked corn prices lower. July corn settled down 9.5 cents at $3.857, the lowest close in five weeks.

July cotton defied the weakness in grains and closed up .78 at 50.69, the highest close in nine weeks with help from dry weather in Texas.

Cocoa
The National Confectioners Association said that the North American cocoa grind totaled 99,875 tons in the first quarter of 2009, down 13% from a year ago. July cocoa finished up $32 at $2,413.

Coffee
July coffee closed down 1.80 cents at $1.1375, the lowest close in four weeks, with ongoing concerns about world demand this year and today's stronger U.S. dollar.

Energies
The 6 to 10 day forecast from the National Weather Service is expecting above average temperatures for the eastern two-thirds of the U.S. and above average precipitation for much of the northern half. June natural gas jumped up 12.9 cents to $3.862, the highest close in over a week, even with abundant supplies in storage.

Metals
June gold fell $11.90 to $867.90, the lowest close in twelve weeks, weighed down by a recent run of good economic news. July silver fell 46.7 cents to $11.814.

Currencies
The Bank of Japan said in its monthly report that "economic conditions had been deteriorating significantly, although there were slight regional differences."

Statistics Canada said that consumer prices were up 1.2% in March from a year ago, down from a 1.4% gain in February. The June Canadian dollar closed down .31 at 82.36.

Construction output in the Euro area 16 was down 1.8% in February and down 11.8% from a year ago.

David Zwebner, CEO
CommStock Trading Ltd.
Tel: +972-(0)2 624-4963
Fax: +972-(0)2 624-4876
www.ecommstock.com