US Court Brands Argentina’s Debt Restructuring as Unlawful

The US district judge presiding over the lawsuit against Argentina emanating from the country’s non-payment in 2001 said that the debt restructuring plan of that country is against the law.

Judge Thomas Griesa of the Manhattan fed court described the proposition of President Cristina Fernandez de Kirchner as unacceptable and illegal. It also violates present court orders, according to the US justice.

However, Griesa turned down a plea of lawyers representing investors who hold Argentina’s defaulted bonds to charge the government for contempt of court. He said that this will not hasten any chance of settlement between both parties.

The attorneys were summoned to court with less than one day notice after lawyers for NML Capital requested for an urgent hearing regarding contempt charges. The company referred to the proposal of Argentina as a severe disrespect for the court but did not propose any penalty.

Last August 19, President Fernandez said the move will enable her government to exchange its updated debt for bonds that would be given out under local legislation and settled through a bank controlled by the government. However, this action violates orders by the US judge compelling Argentina to compensate NML and other entities that refused to compromise over $1.5 billion. Argentina failed to pay $95 billion of arrears in 2001.

Owners of roughly 92 percent of the accountabilities consented to swap their bonds for new ones which amounted to a deficit of approximately 70 percent.

Gold Prices to Drop

gold pricesThe recovering US economy and mounting prospects for early increase of interest rates will bring down prices of gold prices before 2014 closes. However, the effects will not be as significant based on findings of commodity economists from a prominent macro-economic research agency.

According to a spokesperson for Capital Economics, they are still revising the year-end price goal for gold. The company has a target price of $1,400 an ounce.

While the analysts have a negative projection compared to the previous calculation, they do expect the rates to fall down towards the end of this year.

The main reason for the descending adjustment is due to the latest improvement in the national economy. They also see the possibility of the Federal Reserve increasing interest rates earlier than projected.

The company sees rate hikes in March of 2015. Capital Economics reiterated this position after the central bank circulated minutes from the Open Market Committee meeting last month.

These two factors are already incorporated into the market and will most likely have less negative consequences on gold. Instead, expectations of inflation expectations represent the primary driver of gold prices. The economists’ prediction is that growing interest rates could stop the free surge of capital into equity markets compelling investors to adopt a more defensive stance.

US Currency Moves Up as Fed Hints at Possible Interest Rates Climb

The US dollar reached multiple month highs against other primary currencies following the release of minutes from the Federal Reserve’s policy meeting in July.

There was an indication of possible increase in interest rates earlier than it is expected.

The Fed says that the recovery of the labour market is quite fast. However, it does not intend to implement the intended rate hike until an upturn looks more believable.

The Fed committee that sets policies has acknowledged that members are starting to change their views regarding the rates.

Investors are watching developments carefully for indications of when the US central bank will become tougher with monetary rues by boosting interest rates from reduced levels. This can prop up the dollar by pushing more investments into the country.

The dollar gained before the publication of these minutes because of confidence regarding growth of the national economy. There was strong US data early this week.

The dollar index, which quantifies the currency against the six major currencies, reached an 11-month peak of 82.277.

The profit on standard 10-year U.S. Treasury notes was last recorded at 2.43 percent. This is up from the previous reading of 2.41 percent.

Mexico Looks Forward to Multi-Billion Oil Investments

Petroleum Industry MexicoMexico hopes to draw US$50.5 billion worth of investments from foreign and local private corporations four years from now.

This can be part of the launching of its oil venture that starts in 2015 with several pacts, according to oil officials of the country.

It has been labelled as “Round One Tender” and will offer up to 169 exploration and extraction activities. This includes a combination of onshore and offshore locations. It covers an aggregate of 28,500 square kilometres.

The National Hydrocarbons Commission of Mexico will put in order this proposal and will take place sometime in the middle of 2015 but not later than September, according to commission head Juan Carlos Zepeda.

The milestone offer prioritizes areas that will enhance outputs promptly and set aside deep water projects in the meantime.

The government’s energy ministry also allocated 83 percent of Mexico’s likely reserves to Mexican Petroleum (PEMEX) under this Round Zero allocation.

The subsidy offers the Mexican oil firm with a new portfolio of assets to build up on its own or go into joint undertakings with global oil conglomerates such as Chevron Corp.

Mexico is tenth-biggest producer of crude worldwide. However, after reaching production of 3.38 million barrels per day in 2004, this went down to 2.52 million barrels daily in 2013.

It was learned that PEMEX will collaborate with other entities in heavy oil offshore sites and massive deep-water gas expansion.

Central Banks Support Interest Rate Hikes

There is increasing discord in the top two central banks in the world regarding interest rate hikes.

It appears that the period of cheap rates will be coming to an end after nearly six years. Interest rates globally dropped to exceptional lows to avert another economic downfall.

Transcript from the monthly meeting of the Bank of England showed that two Monetary Policy Committee members favoured an immediate increase of 0.25 percent. This was the first disagreement at the BoE since July of 2011. This opposition will probably be a big test for Bank

Governor Mark Carney considering that many economists did not anticipate any rate hike until May of next year.

In a related development, the US Fed released the summary of its July meeting and revealed that disturbing dissent has become more prevalent than usual.

The Federal Reserve also divulged that Philadelphia Fed head Charles Plosser was opposed to the present amicable language. However, the minutes confirm that is just him who clamours for higher rates. The Reserve observed that certain personalities were thinking the central bank was nearing its twin mandate to reckon with rate hikes.

Right now, the Fed is unwinding a US$85-billion bond-buying monthly program which it announced two years ago. This was meant to keep long-term percentages down and fuel the national economy.

Canadian Currency Ascends against other Currencies

Canadian FOREXCanada’s currency moved up against other principal currencies at the trading markets in New York as oil prices increased sooner than the release of official data regarding US oil inventory.

The United States Energy Information Administration (EIA) report is expected to display decline of crude oil stocks by 1.750 million barrels.

A report from the American Petroleum Institute disclosed that crude oil supply dropped less than the likely 1.4 million barrels during the previous week.

Statistics Canada revealed that Canada’s wholesale sales got better for the third successive month. There was an increase of 0.6 percent to C$53.0 billion last June.

Economists projected an increase of 0.4 percent, after a modified 2.3 percent gain one month before.

Meanwhile, Japan had merchandise trade shortfall of 963.99 billion yen last month while Euro zone construction output went down for the second straight month last June, based on Euro Stat data.

Construction output fell 0.7 percent in June from the previous month but the percentage of decline lessened from the 1.4 percent diminution last May.

Current Australian Dollar Performance

Wednesday showed the easing of Australian dollar slightly further after the country’s CB chief downed the currency in a testimony he gave before parliament.

Governor Glenn Stevens of the Reserve Bank of Australia warned last Wednesday that the market has undervalued the danger of an ailing Australian dollar and said it would be possible based on economic fundamentals if the current levels be maintained by the currency.

This was the statements he gave in his early testimony before the Australian parliament committee where he will answer several questions on monetary policy.

The Westpac-MI leading index due in Australia is at1030 (0030 GMT). In the last few readings, the index have been directing to sub-trend growth and more of the same is expected next month.

The Aussie dollar is weaker versus the stronger greenback, after its show of a promising US economic data.

Wednesday morning, the local currency was trading down from 93.29 US cents, to 93.03 cents on Tuesday.

Fed Policy Makers Averse to SEC Controls on Money Market

forex tradingEconomists of the Federal Reserve have cautioned against restrictions imposed by the Securities and Exchange Commission on the $2.6 trillion money market and mutual fund industries.

The Feds claim this will unintentionally encourage a rush by investors instead of controlling them.

The economists said the SEC’s plan will facilitate withdrawal fees and briefly obstruct investor exchanges. The imposition of fees or other costly measures can counteract strong incentives to investors in the middle of a crisis. Restraints on redemptions if liquidity becomes inadequate may jeopardize financial steadiness.

The Financial Stability Oversight Council, composed of prominent financial regulatory officials, declared it will scrutinize the effectiveness of new rules particularly inadvertent effects of

Meanwhile, the SEC admitted that runs on money funds can occur because of new policies although these may not take effect within the next two years.
However, the risks are eased partly because investors will get more information about the condition of funds.
SEC officials also claim that riskiest funds applicable to the big group of institutional investors must give up their permanent $1 share price and float in terms of value.
Money funds refer to cash-like instruments used by private individuals, companies and municipalities to secure cash.

Metals Update

Exchanging at 19.648, silver gained 13 points and was on its own left with a little direction and support. Copper recovered 3 points trading at 3.112 while London copper stayed firm on Tuesday bringing positive prospects for the U.S. economy. However, it was warned over China’s faltering property market, meanwhile a mightier dollar eroded a recovery from seven-week lows.

On Monday, homebuilding stocks in U.S. escalated by data in August reaching its highest level since January. A 234,000 tonne deficit in January to June from global zinc market was shown by a monthly bulletin from Lisbon-based International Lead and Zinc Study Group. The homebuilding stocks of U.S. went up on Monday, boosted by data showing its rising sentiments in August. Increase in copper futures was attributed by analyst to a stable global trend before Chinese data of China considered as the world’s largest users of industrial metals.

Gold gained was under $2 trading at 1301.20 following specific direction before data from US and the forthcoming Jackson Hole conference.  There is little change in bullion trading near the $1300 an ounce mark.

Australian Currency Advances as RBA Restates Secure Interest Rates

australian forexThe Australian note performed well on the trading floor following disclosure of the transcript of the Reserve Bank of Australia’s monthly board meeting.

It indicated a tentative outlook for the economy but hinted that rates will continue at a historic low 2.5 percent showing stability.

Meanwhile, the New Zealand dollar declined as producer prices fell during the second quarter fell and sooner than the central bank projection regarding inflation.

The NZD/USD currency pair traded at 0.8436. This was down 0.46 percent ahead of the Reserve Bank of New Zealand’s pronouncements on inflation possibilities for the third quarter.

Earlier, the one-year inflation expectation of the Reserve Bank of New Zealand was pegged at two percent as well as two-year outlook of 2.35 percent. The RBNZ says it will strive to maintain basic price increases between two and three percent.

The NZ Government reported that producer prices for the second quarter decreased by one percent as against a likely gain of less than one percent.

On the other hand, the US currency traded higher against many major currencies propped up by positive data from the country’s housing industry. The government hopes that diplomatic initiatives by both sides to end hostilities in the Ukraine will produce positive effects.

There have been talks between the foreign ministry officials of both nations. However, no resolution was reported as the movement of humanitarian aid to Ukraine from Russia carried on. This managed to allay fears in the international markets.