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I have stumbled upon an interesting article by Paul Krugman, a Nobel laureate in economics; the article offers an explanation for the hike in gold in the last few years. Krugman, who considers himself a deflationista, i.e. a person who believes the U.S. is currently in a liquidity trap, thinks that the gains in the gold is another confirmation that we are at a liquidity trap: basically in a liquidity trap people and businesses "sit on their money" and even if the interest rates plunge to zero (and the U.S. interest rate has been at zero for the past couple of years), investors are still reluctant to invest their funds. It's hard to prove that we are in a liquidity trap because even if the rates are low and economy is slowing down, ...

Biggest % gainers: USD/ZAR up 0.77%, GBP/AUD, GBP/CHF, USD/CAD, GBP/USD on GBP strength and commodity currency weakness.

Biggest % losers: CAD/JPY down 0.86%, AUD/JPY, NZD/JPY, EUR/JPY, CHF/JPY on JPY strength and commodity currency weakness.

Gold $1,207
Oil $76.72

NZD Retail Sales m/m came out worse than expected last night, weighing on the commodity currencies this morning.

French Bank Holiday today...in observance of National Day.

GBP Claimant Count change better at -20.8K vs. -20.1K expected and -31.1K last time.

EUR CPI y/y in line at 1.4% as expected and same as last time.

USD Core Retail Sales m/m in line at -0.1%. Last ...

Biggest % gainers: GBP/USD up 0.73%, GBP/AUD, GBP/JPY on GBP strength.

Biggest % losers: USD/ZAR down0.71%, USD/CAD, EUR/GBP, EUR/CAD on GBP strength and some CAD strength. The South African rand is strong too, so the commodity currencies are strong at the moment.

Moody's cuts Portugal's Credit Rating. http://www.dailyfx.com/forex/market_...l_Debt_to.html

Gold $1,216 perking back up.
Oil $76.56

GBP CPI y/y inline at 3.2% but lower than 3.4% last time.

EUR German ZEW Economic Sentiment worse at 10.7 vs. 16.8 expected and 18.8 last time.

CAD Trade Balance worse at -0.5B vs. 0.0B expected and -0.3B ...

The markets are somewhat tame on the day before the FOMC meeting.

Biggest % gainers: USD/ZAR up 0.51%, USD/SGD, USD/TRY as the USD strengthens vs. the exotics.

Biggest % losers: EUR/CHF down 0.72%, EUR/JPY, EUR/CAD on mild EUR weakness.

GBP In the U.K's Annual Budget meeting we found out that, U.K's Prime Minister Osborne is putting levies on banks and raising the sales tax. He expects to raise 2 billion pounds from the bank levies. The VAT (value-added tax) will go from 17.5% up to 20%.

Australian & Canadian dollars are finding their way into central bank reserves more as the euro continues to tank overall: http://www.bloomberg.com/news/2010-0...e-gaining.html ...