The anti-dollar move is relentless. Though todays economic releases are not typically seen as the first tier market movers that some of the previous two sessions indicators are, the precarious levels of majors and unexpected changes made todays move the biggest since Friday.
Looking to the charts, the windfall dollar selling began in earnest in the Asian session. From a level of support around 1.3140, the euro rallied 135 points through the morning hours of the New York session after state-side data threw enough fuel in the fire to push the pair through soft resistance levels. The Japanese yen was trying to overtake the dollar with tests of 115.50 support coming on a 105 point decline through the day. The same was true of the Swiss franc, which took out a weakened 1.2015 floor to carry through to 1.1960 for a 145-point slide. Finally, the British pound was once again taking the lead in the anti-dollar rally. The GBPUSD cleared all resistance levels in a 135 point run that brought the pair to 15-year highs at the 1.9700 figure.
Finally seeing the levels of volatility many traders had missed out on over last weeks extended holiday for US and Japanese markets, traders were on the move this morning as economic indicators catalyzed the greenback lower. Like the previous session, todays news came in two waves. The first swell piqued market participants interest with personal income and spending, PCE-level inflation and jobless claims; but its primary roll was to build the pressure. In the usual sequence of analysis, the market honed in on personal spending and income numbers first. The typical disappointment in spending and strength in earnings reversed its roles in October. Americans spent 0.2 percent more over the month, the biggest increase in three months. At the same time, income growth slowed for the first time in six months. When the two indicators were considered together it was spending indicator that won traders affections as it rebuffs some of the weakness in the housing market, especially with predictions of the following month incorporating a 19 percent jump in Thanksgiving holiday sales from the same period a year ago. Printing at the same time, the PCE figures were objectively weighing in on the Feds consistent assurances that inflation risk is primarily to the upside. The annual measurement of the central banks favored inflation gauge shirked expectations of a slight contraction to repeat September 2.4 percent pace of expansion. Usually reserving the last glance, weekly jobless claims were the biggest surprise for the hour. Initial claims for the week ending November 25 ballooned from to 353,000, the most in over a year. While at first glance this seems to set up a poor NFP read next week, it must also be taken into account that adjustment for the Thanksgiving weekend likely skewed the numbers.
Whereas the first flood of indicators built pressure in the majors, the second round triggered momentum. The Chicago Purchasing Managers and housing price index stepped up the fundamental magnitude for the days economic picture. Following up on the previous two sessions new and existing home sales reports, the third quarter price index likely drew the first look. Expectations of a modest 0.5 percent pace of growth were in place as many speculators jumped on the price components from the monthly sales reports, which have printed the biggest drop in offer prices in over three decades. However, the damage was not yet so severe as growth met a 0.9 percent pace for an eight year low.
While the housing indicator provided mixed results when expectations were taken into consideration, Chicagos regional factory activity report was categorically negative for the dollars interests. The last manufacturing report before Fridays national ISM report, the survey dropped below the expansionary/contractionary 50.0 level for the first time since April 2003. At 49.9 for November, the reports various components were almost uniformly worse than preceding months. Production and new orders fell 4.8 and 2.1 points respectively, while reports that backlogs were falling picked up. Especially noteworthy from report was the employment sub-gauge which seconded the early jump in initial claims by falling to its lowest level since July of 2004. All together this indicator suggests factories are preparing for a drop in consumer and business demand in the months ahead. Should the ISM report tomorrow support these fears, the dollar could be forced even lower.
Equities were attempting to fend off further declines by mid-day trade after weak factory and employment reports spurred more profit taking. The Dow was unceremoniously leading the benchmark declines by 18:00 GMT with a 0.36 percent decline to 12,183.07. The S&P 500 and NASDAQ Composite were each off 0.12 percent from yesterdays close to 1,397.87 and 2,429.43 respectively. Retail stocks were leveraging fear over the broad economy ahead. Wal-Mart Stores offered up its December sales forecast with a flat projection, leading shares to tumble $0.56 or 1.2 percent to $46.32. Shares of Gap Inc. were 2.5 percent lower on a $0.47 decline to $18.60 after announcing a 0.8 percent drop in November same-store sales.
Treasury traders finally took sides Thursday, attaching themselves to the weak factory report and stable inflation numbers. Ten-year notes were 14/32nds higher at 101-08 by 18:00 GMT with yields 5 basis points off at 4.466. Longer duration bonds were 21/32nds lower at 98-27 as its own yield fell 4 basis points to 4.572.
