Oil Slips Below $106

Friday, March 28, 2008 3:58:54 PM - Crude oil closed below $106 as concerns of supply disruption by violence in Iraq have eased. Light sweet crude for May delivery closed at $105.62, down $1.96. Crude dropped as low as $104.71 in mid-morning trading.

Oil climbed to a 10-day high on Thursday after a bomb blast caused an explosion at a pipeline in the southern Iraq city of Basra. Reports surfaced of a second bombing later in the day, sending prices higher again.

Crude also rallied on Wednesday following the release of the weekly inventory report that showed stockpiles unexpectedly remained the same. The report from the Energy Information Administration showed that crude oil inventories were unchanged at 311.8 million barrels. Analysts had been expecting crude oil inventories to increase by about 1.7 million barrels.

Crude oil approached its 10-day and 20-day moving averages with the slide. Stochastics and the RSI showed neutral levels for May crude. If prices turn higher, the next upward target is the high crossing of March 18 at $108.90. That came on the April contract's final day before expiring.

On the economic front Friday morning, the Department of Commerce released its report on personal income and spending in the month of February, showing that personal income increased by more than economists had been expecting. The report showed that personal income rose 0.5 percent in February compared to a 0.3 percent increase in January. The increase exceeded the estimates of economists, who had expected personal income to increase by 0.3 percent.

Also, the University of Michigan released its consumer sentiment index for March. The index edged lower to 69.5 in March from 70.8 in February, which was down from January.


Dollar Stable Versus Other Majors After Consumer Spending, Inflation Data [EUR/USD]

Friday, March 28, 2008 3:17:40 PM - The dollar gained on the sterling but saw little movement versus the euro and sterling on Friday in New York. The buck was stable as concerns about the mindset of the US consumer were offset by the release of relatively tame inflation data.

Data from the Commerce Department revealed that personal income increased by more than economists had been expecting, but consumer spending grew an an anemic 0.1 percent, confirming fears that the US consumer are feeling the pinch of problems in the housing and credit markets.

The report also showed that the Commerce Department's closely watched reading on core consumer prices edged up 0.1 percent in February after increasing by 0.2 percent in each of the four previous months.

The dollar extended its gains from the previous session amid more signals that the UK economy has weakened significantly. The buck rose to 1.9920, up a cent from its early levels. Traders reacted to data showing that UK economic growth slowed more than estimated from the prior year in the fourth quarter of 2007.

The Office for National Statistics announced that the annual economic growth for the fourth quarter slowed to 2.8% from 3.1% in the third quarter. The growth for the fourth quarter was revised down from 2.9% initially estimated.

The dollar moved roughly sideways versus the euro, trading between 1.5750 and 1.5850 for most of the day. The dollar stayed near its record low of 1.59 from earlier in the month.

The consumer price index for Germany in March 2008 is expected to rise by 3.1% from March 2007, according to data release by Destatis on Friday. Compared with the previous month, the index is up 0.5%. Annual CPI was a bit higher than expected, with analysts having predicted a 2.9 percent increase.

March's preliminary CPI number came in much higher than the 2.0% maximum rate established by the ECB's margin for price stability. Earlier this week, ECB President Jean-Claude Trichet amped up his hawkish rhetoric, saying that euro zone inflation is expected to remain significantly above 2 percent for most of 2008.

The greenback bounced back and forth around the century mark versus the yen on Friday, slipping to 99.40 in late afternoon dealing. The pair has seen little movement over the past 2 weeks, with the dollar attempting to stabilize after dropping to a 12-year low of 95.70 on March 15.

In Japan, core consumer prices, excluding fruit, fish and vegetables, increased 1% year-on-year in February, adding to the Bank of Japan's concerns about controlling inflation. The overall CPI rose 1% in February, also rising for the fifth straight month. February marked the fifth consecutive month for CPI growth. January's gain was 0.8%. Most economists predicted the February increase would be 0.9%.