The top contestant in the currency portion of the contest is making a sprint to the end as he made nearly $140,000 in a single day to bring his portfolio balance up to $580,879.33, which puts him nearly $300,000 ahead of the next runner up. Contestant number 1 certainly had to work hard for his 31% gain though, as he executed over 300 short-term EUR/USD trades!
Meanwhile, contestants number 2 and 3 haven’t really made much headway. Contestant number 2, whose portfolio amounted to $288,517.10 as of Tuesday’s close, actually lost money as he sought to catch a bottom in USD/JPY. On the other hand, contestant number 3 has not made any trades since closing a short USD/JPY position near 106, bringing his balance up to $285,300.49. However, USD/JPY started to show signs of recovery this morning when the pair has bounced from the 104 level amidst a rebound in equities and surge in the US dollar.
Indeed, Wells Fargo’s announcement that net income fell less than expected and a 10% boost to the firm’s dividend has led the DJIA to rise back above 11,000. Meanwhile, significantly stronger-than-forecasted US inflation figures supported the greenback. In fact, CPI jumped 1.1% during the month, bringing the annual rate up to a more than 17 year high of 5.0%. Unsurprisingly, a breakdown of the report shows that energy prices were responsible for the bulk of the rise, as they gained 6.6 percent from a month ago and 24.7 percent from a year earlier, while food costs rose 0.8 percent. What may be most disconcerting to the Federal Reserve, however, was the unexpected increase in core CPI of 0.3% during the month and 2.4% from a year earlier. As Federal Reserve Chairman Ben Bernanke noted yesterday, "the currently high level of inflation, if sustained, might lead the public to revise up its expectations for longer-term inflation." Nevertheless, the central bank is unlikely to raise interest rates in response due to the looming downside risks to growth and unstable conditions in the financial sector.
Terri Belkas, Currency Analyst for DailyFX.com