The US dollar slid against all its major counterparts Wednesday as data bolstered market participants’ confidence in a 25bp rate cut by the Fed on April 30. And, in the fray, the greenback would end up setting a record low against the euro at 1.5978 – thanks in part to strong inflationary pressures in Europe, which further highlighted the dollar’s shaky rate prospects. The British pound also advance against the benchmark with steady employment data of its own. The Canadian and Australian dollar took the biggest bite out of the weakened dollar through as oil futures touched a new intraday record above $115. Finally the low yielding Swiss franc and yen picked up minor gains, however, with risk aversion cooling its heels.
On the economic front, data was offering little support the beleaguered US currency. The Consumer Price Index matched economists consensus for no change to the headline reading at 4.0 percent annualized. Alternatively, the core inflation reading was a little more noteworthy as it inched higher to 2.4 percent from 2.3 percent. Under normal circumstances, these elevated price pressures would raise a red flag on impending rate hikes from the Fed, but higher figures have failed to turn the policy body from deep cuts. Elsewhere, the housing market spiraled ever deeper into its recession as housing starts plunged to a 17 year low to an annualized 947,000-unit pace of construction, while permits dropped to an equivalent low. Factory activity was the only promising reading for the day with a 0.3 percent rise in industrial production through March. However, any optimism that could have come from this minor indicator was quickly washed out by a Beige Book that reported a cooling in the economy through February, with a specific drop in employment, consumer spending and housing market activity.
The stock markets advanced through the active session as Intel improved their forecasts for the second quarter and JP Morgan reported a slighter drop in earnings than analysts had forecasted. By the session’s close, the DJIA rose 256.80 points to 12,619.27 points, with 27 of the 30 components advancing. The broader S&P500 picked up 30.28 points to put the benchmark at 1,364.71. Subsequently, 212 stocks hit a new 52 week high through the session.
US Treasuries faced downward pressure thanks to the rebound in risk appetite that found commodities and equities as attractive investment alternatives. The benchmark 10-Year yield rose to 3.691 percent from 3.598 percent, while the 2-Year yield jumped to 1.971 percent from 1.823 percent.
Looking ahead, the Initial Jobless Claims and Continuing Claim index will kick the New York session Thursday morning at 12:30 GMT. Attention will then shift to the Leading Indicators and the Philadelphia Fed index due at 14:00 GMT. Fed speak will also attract dollar traders’ attention as market participants look for signs to the Fed’s next move in speeches delivered by Kohn and Fisher.
