Strength in USD Limits Commodity Gains. RBA Rate Hike and EUR Decline Hurt Gold

Commodities retreat after rallying yesterday. While profit-taking is a reason explaining the pullback, strength in the dollar due to resurgent worries about Greece's deficit issue also triggers decline in risky assets. WTI crude oil price slipped after surging to as high as 86.9 yesterday but buying interests were seen above 86. The market focuses on the US Energy Department's report which probably shows stock builds in crude oil inventory but draws in gasoline and distillate stockpiles. API's report after market close later today may offer guidance. Currently trading at 4.28, natural gas price stabilizes after gaining more than +10% over the past 2 days. The US Energy Department said that some of its gas output numbers were inflated in the monthly release as new drilling techniques and booming of small shale gas producers have increased difficulties of estimating the data. The Department will use more up-to-date data to estimate natural gas output, starting with the next report due out on April 29. The news suggests that the actual gas supply in the US may not be as huge as previously thought and this helped boost gas price. Another reason for the price rally was certainly strong US economic data. A newspaper report said that Greece may borrow money from sources other than the IMF to cover its debt due in May. The report, though unverified, said that the Greek government was seeking $5-10B from US investors, instead of the EU-IMF bailout package as the conditions required by the latter are too harsh. Both Greek bonds and the euro got hammered as a result of the news. The yield on the Greek 10-year bond soared to the highest level since February 1. EUR plummeted -0.5% against USD, almost -1% against JPY. The single currency also reached a record low against Australian dollar after the RBA raised its cash rate by a quarter basis points to 4.25%. The RBA increased its policy rate for the 5th time in 7 months as Australian economy recovers faster than expected. The central bank is expected to continue its process in bringing interest rates back to 'normal'. As mentioned in the accompanying statement, 'interest rates to most borrowers nonetheless have been somewhat lower than average. The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today's decision is a further step in that process'. Gold price pulls back after advancing for 3 trading days. Decline in euro hurts the yellow metal while RBA's rate hike increases opportunity cost in owning gold.