Overnight Developments

eCBOT grains are a tad higher this morning in see-saw trade. At 9.15am GMT soybeans were around 5c higher, with corn and wheat up 2-3 cents.

Grains failed to hold onto yesterdays gains last night as month, quarter and year-end profit-taking kicked in after two or three sessions of strong gains.

The market seems however underpinned for the time being by dryness in South America (see here for some truly shocking Argy wheat yield statistics), strong Chinese buying and a weaker dollar (although not so much against an equally weak sterling).

Crude oil is half a dollar lower at $39.50/barrel. Crude prices rose above $40 a barrel yesterday as Israel and Palestinian militants exchanged rocket fire and the death toll mounted.

Crude is set for it's first annual decline for seven years in 2008.

Although US stockpiles are rising, this is partly due to the holiday season and also the contango situation that exists in the market, where the large premium between nearby months and forwards pays the oil giants to store oil.

OPEC's cuts, if carried through, may well start to squeeze supplies as we get into the new year, ultimately supporting the markets by the spring.

The pound is currently trading at 1.0239 against the euro, close to yesterday's all-time low of 1.0210. that makes one euro worth 97.74 pence, just under yesterdays low of 98 pence.

The dollar is down the most in a fortnight against the euro, at 1.4187 from 1.3927, on concerns that the problems in the Middle East will lead to disruptions in crude oil supplies. It seems pretty unlikely to me that this will, in reality, be the case. The eurozone does, however, offer a substantially better interest rate than the US at the moment, if you can call 2.75% attractive.