Investor inflows into commodities have picked up pace, helping lift prices in energy, agricultural and base metals markets.

In the oil market, Nymex July West Texas Intermediate reached $70.32 on Friday, a seven-month high, but later retreated to trade 25 cents lower at $68.56 a barrel, up 3.4% this week.

ICE July Brent hit $69.91 but later eased back to trade 41 cents lower at $68.30, up 4.2% on the week.

On Thursday, Goldman Sachs raised its 2009 year-end projection for oil prices from $65 a barrel to $85 a barrel and dropped its previous forecast for a pullback in the next three months.

Gold fell 2% to $959.50 a troy ounce on Friday, retreating after the Dollar gained in response to better US employment data than expected.

Gold hit $989.80 on Wednesday but lost 2% over the week as investor inflows into gold exchange-traded funds and buying interest from jewellery makers remained muted.

However, all the ingredients are in place for a bull run in gold and gold stocks I feel - the Dollar is beginning to wobble quite badly (as I said it would), US Treasuries are under pressure and inflation is set to rise.

Among the base metals, copper rose 3.5% to $5,000 a tonne this week. Analysts at RBS (what do RBS know about anything other than how to draw a large salary and borrow money?) warned that global copper stocks were declining to critically low levels, having fallen from a peak of 619,000 tonnes to 400,000 tonnes, sufficient for just 3.4 weeks of consumption.

RBS noted that the recovery in copper demand had not yet started and warned that "price fireworks" were likely in the fourth quarter.

Aluminium breached the $1,600 a tonne level on Friday for the first time since early January and reached $1,610.5 before easing back to $1,572, up 9.2% this week. Short closing helped aluminium rise but traders warned that further price gains would be limited by massive global stocks, estimated at 4.4m tonnes, or 40 days of consumption.

Sentix Investor Confidence is anticipated to improve slightly to an 8-month high of -31 for the month of June from -34.3, as European equity markets have steadily climbed higher.

Meanwhile, the German Trade Balance and Industrial Production readings for the month of April are likely to reflect the impact of weak export demand from the nation's trading partners, as the trade surplus may narrow to 9.3B Euros from 11.3B Euro, while industrial output could shrink an annualized 20.5%.

The final German CPI figures aren't anticipated to reflect any revisions, but that would still leave the annualized rate of inflation at zero, signaling deflation potential.

Finally, the ECB's Monthly Report may not shed much more light on the ECB's policy bias, but traders should still keep an eye out for surprising comments as they could easily shake up the Euro upon release.

Up until the second half of this past week, the British Pound was enjoying a steady and aggressive rally against its US counterpart. However, a 22% rally in as few as three months with fundamentals like the United Kingdom's is clearly a reason to be at the very least, a little sceptical.

The nearly 700-point drop over the final three days of the trading week is far from confirmation of a trend reversal; but it should be enough of a jolt to remind market participants that Europe's largest economy is pacing the global recession and financial conditions are balanced on a knife's edge. Looking ahead to next week, there is likely to be short-term volatility from scheduled economic releases and a close eye kept on the stability of the government's upper echelons; but Sterling traders' real guide will be risk appetite.

How is it that the currency of an economy that is expected to suffer the worst economic contraction in the industrialized world, has ongoing troubles with credit and financial conditions, and is now seeing political turmoil has been able to produce such an impressive rally across the board?

There is the argument that the currency was oversold and that the fundamental outlook for the UK has perhaps reached an equilibrium with its major counterparts.

However, this is a fundamental consideration that would take considerable time to develop. The only way a currency as fundamentally depressed as the Sterling would be able to appreciate so rapidly is through a sharp turn in global growth and financial condition forecasts.

The appetite for capital appreciation is fulfilled through speculation that the currency was oversold. Fundamental forecasts improve as the aggressive steps policy officials took to revive the economy would help leverage the ensuing recovery. And, yield forecasts are massaged as the MPC would be expected to reign in their quantitative easing and immediately concentrate on inflation.

Is it reasonable to project such an aggressive turn in sentiment and the particular influence it should have on the Pound?

We all see slight signs around the global that the pace of recession is letting up; but that is not the same thing as a return to positive growth. To maintain a rally an advance in risk appetite, we need irrefutable evidence of a near-term economic recovery.

Otherwise, speculative capital is merely building a bubble that prevailing levels of risk and return cannot support.

Sterling traders will have to concern themselves with key data releases and politics. The latter subject has hit a fever pitch over the past few weeks. While the public has long held the government responsible for the economy's current economic woes (or at least its severity), the tumult has not reached the level where resignation has been considered - until now.

Local elections have shown an irrefutable lack of confidence in sitting members and Prime Minister Gordon Brown has been forced to shuffle his cabinet. However, market participants are concerned primarily with the major players in the economic crisis - the PM himself and Chancellor of the Exchequer - whose absence could derail the progress that has been made to this point.

To gauge the market's sensitivity to such a possibility, we merely need to see the sharp drop in the Pound when rumour (which had to be officially dismissed by the government) that Brown would soon announce his resignation. 

As for data next week, the docket is thin but potent. Consumer spending will be measured through the BRC's retail sales for May. Though expectations are low. For factory activity, the plunge in industrial production has eased significantly through first quarter; but we are still waiting on the first positive reading in 14 months.

Housing price indicators and trade figures will round out the picture with indirect appraisals of credit availability and foreign demand.

The US economic calendar promises far fewer top-tier releases in the days ahead, but what it lacks in quantity it compensates with substance.

Foreseeable highlights will come on historically market-moving Advance Retail Sales data, University of Michigan Consumer Confidence survey results, and international Trade Balance figures.

NFP numbers showed that the US consumer lost fewer jobs than feared through the month of May, but the sizeable loss still bodes poorly for downtrodden household spending rates. Given the combination of massive wealth destruction and near-catastrophic jobs losses, the historically voracious US shopper cut back on Retail spending by a sizeable 9.4% through the 12 months ending in April.

Median forecasts call for a 0.5% uptick in spending through May, but such predictions are mostly based on double-digit increases in gasoline prices and not a real recovery in aggregate demand.

University of Michigan Consumer Confidence and Trade Balance forecasts are relatively sanguine, but they are less likely to force major US Dollar moves than the Advance Retail Sales report.

Far more significant in my opinion, it will be critical to monitor FX trader sentiment and whether or not we truly hit a US Dollar bearish extreme or as I actually believe, there is much more US Dollar bearishness coming up in the months ahead.

Here in the AsiaPac' region, in searching out the catalysts for and pace of market sentiment, we should not disregard the impact of native economic data on the battered Japanese Yen.

Just a short time ago, both the Cabinet Office and Bank of Japan released forecasts that called for the pace of the nation's recession to ease going forward. This aligns itself to what other policy authorities have said and a few bright spots on the economic calendar; yet it is still a bold prediction.

Scepticism will remain until objective data can confirm what the economy's cheerleaders have professed. The most thorough measure of health next week will be the final reading of 1Q GDP, which will no doubt confirm the worst slump on record.

The more timely indicators could bolster sentiment though. The trade balance, Eco Watchers survey, consumer confidence survey and leading indicators index are all expected to show measured improvements next week.

This round of data will be good for minor adjustments on long-term trends; but don't expect them to generate much in the way of volatility on their own.

All told, I feel the markets are still in a floating state of 'uncertainty', with the exception of Commodities which have done exceptionally well these past few weeks and look solid for the coming months.

Stockmarkets are in a quandary and whilst I cannot dispute some of these 'better than expected' numbers that seem to be generating the interest/confidence, I still cannot dismiss the fact that the gains of the past 2 months were 'too much, too soon' and we will see a reversal of sorts in the weeks/month ahead.

 

Finally, as an aside, under the break-up conditions of GM (General Motors) and their bankruptcy, did anyone notice which Country (yes, country) other than the US owns a stake in GM moving forward post bankruptcy?

 

It is Canada, the Canadian Government now own 10% of GM and the US Government a further 60%.  Go figure that one out over a weekend coffee if you will!